TIDMBGEO
RNS Number : 2646Q
Bank of Georgia Group PLC
25 February 2021
Bank of Georgia
Group PLC
4(th) quarter and full year 2020
preliminary results
Name of authorised official of issuer responsible for making
notification:
Natia Kalandarishvili, Head of Investor Relations and
Funding
www.bankofgeorgiagroup.com
ABOUT BANK OF GEORGIA GROUP PLC
The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or
the "Group" - LSE: BGEO LN) is a UK incorporated holding company,
which comprises: a) retail banking and payment services; and b)
corporate banking, investment banking and wealth management
operations in Georgia; and c) banking operations in Belarus
("BNB").
JSC Bank of Georgia ("Bank of Georgia", "BOG" or the "Bank"),
the systematically important and leading universal bank in Georgia,
is the core entity of the Group. The Bank is a leader in payments
business and financial mobile application, with the strong retail
and corporate banking franchise in Georgia. With a continued focus
on increasing digitalisation and expanding technological and data
analytics capabilities, the Bank aims to offer more personalised
solutions and seamless experiences to its customers to enable them
to achieve more of their potential.
The Group aims to benefit from growth of the Georgian economy,
and through both its Retail Banking and Corporate and Investment
Banking services targets to deliver on its strategy, which is based
on at least 20% ROAE and c.15% growth of its loan book in the
medium term.
4Q20 AND FY20 PRELIMINARY RESULTS AND CONFERENCE CALL
DETAILS
Bank of Georgia Group PLC announces the Group's preliminary
consolidated financial results for the fourth quarter and the full
year of 2020. Unless otherwise noted, numbers in this announcement
are for 4Q20 and comparisons are with 4Q19. The results are based
on International Financial Reporting Standards ("IFRS") as adopted
by the European Union, are unaudited and derived from management
accounts. This results announcement is also available on the
Group's website at www.bankofgeorgiagroup.com .
The information in this Announcement in respect of full year
2020 preliminary results, which was approved by the Board of
Directors on 24 February 2021, does not constitute statutory
accounts as defined in Section 435 of the UK Companies Act 2006.
Company and Bank of Georgia Group PLC's consolidated financial
statements for the year ended 31 December 2019 were filed with the
Registrar of Companies, and the audit reports were unqualified and
contained no statements in respect of Sections 498 (2) or (3) of
the UK Companies Act 2006. Company and Bank of Georgia Group PLC's
consolidated financial statements for the year ended 31 December
2020 will be included in the Annual Report and Accounts to be
published in March 2021 and filed with the Registrar of Companies
in due course.
An investor/analyst conference call, organised by the Bank of
Georgia Group, will be held on 25 February 2021, at 13:00 GMT / 14
:00 CET / 08 :00 EST .
Webinar instructions:
Please click the link below to join the webinar:
https://bankofgeorgia.zoom.us/j/97731484877?pwd=ZFkxNmp6YWpaNTdBUFJkZjcza2pZZz09
Webinar ID: 977 3148 4877
Passcode: 582237
Or use the following international dial-in numbers available at:
https://bankofgeorgia.zoom.us/u/adbPxP2FUw
Webinar ID: 977 3148 4877#
Passcode: 582237
Participants, who will be joining through the webinar, can use
the "raise hand" feature at the bottom of the screen to ask
questions. Participants, who will be joining through the
international dial-in number, can dial *9 to raise hand and ask
questions.
CONTENTS
4 Impact of COVID-19 global pandemic
5 4Q20 and FY20 results highlights
7 Chief Executive Officer's statement
8 Discussion of results
12 Discussion of segment results
12 Retail Banking
16 Corporate and Investment Banking
19 Selected financial and operating information
23 Glossary
24 Company information
FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements,
including, but not limited to, statements concerning expectations,
projections, objectives, targets, goals, strategies, future events,
future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, competitive
strengths and weaknesses, plans or goals relating to financial
position and future operations and development. Although Bank of
Georgia Group PLC believes that the expectations and opinions
reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations and opinions will
prove to have been correct. By their nature, these forward-looking
statements are subject to a number of known and unknown risks,
uncertainties and contingencies, and actual results and events
could differ materially from those currently being anticipated as
reflected in such statements. Important factors that could cause
actual results to differ materially from those expressed or implied
in forward-looking statements, certain of which are beyond our
control, include, among other things: macroeconomic risk, including
currency fluctuations and depreciation of the Georgian Lari;
regional instability; loan portfolio quality; regulatory risk;
liquidity and funding risk; capital risk; operational risk, cyber
security, information systems and financial crime risk; COVID-19
pandemic impact risk; climate change risk; and other key factors
that indicated could adversely affect our business and financial
performance, which are contained elsewhere in this document and in
our past and future filings and reports of the Group, including the
'Principal risks and uncertainties' included in Bank of Georgia
Group PLC's Annual Report and Accounts 2019 and in 2Q20 and 1H20
results announcement. No part of this document constitutes, or
shall be taken to constitute, an invitation or inducement to invest
in Bank of Georgia Group PLC or any other entity within the Group,
and must not be relied upon in any way in connection with any
investment decision. Bank of Georgia Group PLC and other entities
within the Group undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise, except to the extent legally required.
Nothing in this document should be construed as a profit
forecast.
IMPACT OF COVID-19 GLOBAL PANDEMIC
The COVID-19 global pandemic has tested the resilience and
character of both Georgia and Bank of Georgia, together with that
of all of our colleagues and customers. Our performance during 2020
was, therefore, significantly affected by a number of related
factors:
-- Measures implemented by the Georgian Government to address
the COVID-19 crisis, including the economic lockdown
-- Measures introduced by the National Bank of Georgia (the
"NBG") in response to the COVID-19 crisis, and
-- Actions implemented by the Group to address the COVID-19
crisis
Georgia successfully contained the first wave of the pandemic by
introducing tight lockdown measures, including a curfew and a ban
on transportation in 2Q20. From mid-May, businesses gradually
reopened, but international flights resumed only to a limited
number of countries from August 2020. A surge in COVID-19 cases in
autumn resulted in further lockdown measures put in place in the
retail and hospitality sectors at the end of November 2020, as well
as a curfew and a ban on public transportation, while avoiding a
full-scale lockdown for other areas of the economy, unlike in
April-May. The Government responded to the pandemic with higher
healthcare spending, a social assistance package for individuals,
as well as tax exemptions and various funding mechanisms for
businesses, and stimulus plans for some sectors of the economy.
This was financed with the support of international donors, as the
ongoing IMF programme and trust in the Government's continued
prudent macroeconomic policy-making enabled the authorities to
mobilise significant donor funding.
Georgia's economy contracted by an estimated 6.5% y-o-y in 4Q20,
reversing the recovery in 3Q20, on the back of the second wave of
the COVID-19 cases and the new restrictions introduced by the
Government. Domestic demand moderated due to the restrictions on
mobility, as well as other restrictions introduced in large cities
at the end of November 2020. Despite deceleration, the banking
sector loan portfolio growth remained robust, increasing by 9.1%
y-o-y on a constant currency basis, minimising the second wave
impact of the pandemic on the economy. Importantly, remittances
continued to grow and were up 15.7% y-o-y in 4Q20. This, along with
an improved trade deficit and the NBG interventions, stabilised the
local currency at the end of December 2020. International reserves
increased to US$ 3.9 billion as at 31 December 2020, largely
reflecting the increased donor funding. The NBG maintained a
moderately tight monetary policy to anchor inflation expectations
and limit any pass-through impact from local currency depreciation.
Annual inflation dropped to 2.4% in December 2020 from 3.8% in
previous months, mainly reflecting utility subsidies by the
Government for low-energy consumers. Notably, on 12 February 2021,
Fitch Ratings affirmed Georgia's sovereign credit rating at BB,
supported by strong governance and business environment indicators
as well as consistent and credible policy framework underpinning
Georgia's relative resilience to shocks.
In 2021, projected economic growth in Georgia is expected to be
driven by a gradual lifting of existing restrictions, a vaccination
roll-out starting from March 2021, improved domestic and external
sentiments, and continued fiscal stimulus. That said, the COVID-19
pandemic still remains one of the key uncertainties in the growth
outlook. Based on the estimates of our brokerage and investment
arm, Galt & Taggart, we currently expect real GDP growth at
around 5.0% in 2021, assuming further re-opening of borders and
partial tourism return in the second half of 2021. In a downside
scenario, assuming slow return in tourism, the economic growth is
expected at around 3.6% in 2021.
To respond to the pandemic outbreak in spring 2020, the Group
introduced a number of resilience protocols and a comprehensive
Business Continuity Plan aimed at mitigating the negative impact on
our business, employees, customers and our communities. We have
implemented measures to reduce physical interactions to prevent the
virus spread, whilst maintaining the full banking capability
required to support and assist our customers. This included fully
moving back office staff to working from home, significantly
ramping up the capacity of the call centre, temporarily closing the
customer service support areas of Express branches (mostly
re-opened in June), implementing a three-month grace period on
principal and interest payments on all retail loans, applying more
stringent risk assessment procedures during the lending process,
incentivising the offloading of customer activity to digital
channels through the temporary removal of fees on transactions
executed through our mobile and internet banking platforms, among
others. In the fourth quarter of 2020, following the emergence of
the second wave of the COVID-19 cases, the Bank again adjusted
accordingly, moving a large part of its back office staff to remote
work and reintroducing two-week shifts for certain departments and
the front office staff.
Whilst our second quarter results were significantly impacted by
the environment and the measures we put in place to manage the
crisis, we have seen significant recovery in economic activity
since June 2020. The recovery slowed-down in 4Q20 on the back of
new partial lockdown restrictions introduced at the end of November
2020 , which primarily affected our Retail Banking results .
Notwithstanding this slowdown, our lending activity has remained
strong, operating income and, particularly, net fee and commission
income generation was up, our loan book has been performing better
than expected in terms of portfolio quality, and client deposits
and notes continued to grow. As a result, we delivered a return on
average equity of 21.3% in the fourth quarter of 2020, and a return
on average equity in excess of 20% in each of the last three
quarters of the year, while maintaining strong liquidity and
capital positions.
We next outline the Group's fourth quarter and the full year
results highlights and the Chief Executive Officer's letter, before
going into further detail.
4 Q20 AND FY20 RESULTS HIGHLIGHTS
Change Change Change
GEL thousands 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
INCOME STATEMENT HIGHLIGHTS(1)
Net interest income 201,596 207,091 -2.7% 204,030 -1.2% 777,642 789,419 -1.5%
Net fee and commission
income 46,958 46,558 0.9% 45,532 3.1% 165,503 180,014 -8.1%
Net foreign currency gain 26,457 37,177 -28.8% 19,179 37.9% 99,040 119,363 -17.0%
Net other income 25,016 18,439 35.7% 7,750 NMF 48,474 21,474 125.7%
Operating income 300,027 309,265 -3.0% 276,491 8.5% 1,090,659 1,110,270 -1.8%
Operating expenses (118,857) (121,545) -2.2% (102,612) 15.8% (432,635) (419,946) 3.0%
Profit from associates 154 153 0.7% 214 -28.0% 782 789 -0.9%
Operating income before
cost of risk 181,324 187,873 -3.5% 174,093 4.2% 658,806 691,113 -4.7%
Cost of risk (38,431) (14,232) NMF (10,942) NMF (300,997) (107,584) NMF
Net operating income before
non-recurring items 142,893 173,641 -17.7% 163,151 -12.4% 357,809 583,529 -38.7%
Net non-recurring items 21 (1,591) NMF 254 -91.7% (41,311) (10,723) NMF
Profit before income tax
and one-off costs 142,914 172,050 -16.9% 163,405 -12.5% 316,498 572,806 -44.7%
Income tax expense (11,065) (15,515) -28.7% (15,051) -26.5% (21,555) (58,619) -63.2%
Profit adjusted for one-off
costs 131,849 156,535 -15.8% 148,354 -11.1% 294,943 514,187 -42.6%
One-off termination costs - - - - - - (14,236) NMF
of former CEO and executive
management (after tax)
Profit 131,849 156,535 -15.8% 148,354 -11.1% 294,943 499,951 -41.0%
GEL thousands Dec-20 Dec-19 Change Sep-20 Change
y-o-y q-o-q
BALANCE SHEET HIGHLIGHTS
Liquid assets 6,531,357 5,559,500 17.5% 6,339,663 3.0%
Cash and cash equivalents 1,970,955 2,153,624 -8.5% 2,154,224 -8.5%
Amounts due from credit
institutions 2,016,005 1,619,072 24.5% 1,980,195 1.8%
Investment securities 2,544,397 1,786,804 42.4% 2,205,244 15.4%
Loans to customers and
finance lease receivables(2) 14,192,078 11,931,262 18.9% 13,627,144 4.1%
Property and equipment 387,851 379,788 2.1% 390,401 -0.7%
Total assets 22,035,920 18,569,497 18.7% 21,166,953 4.1%
Client deposits and notes 14,020,209 10,076,735 39.1% 12,985,039 8.0%
Amounts owed to credit
institutions 3,335,966 3,934,123 -15.2% 3,757,646 -11.2%
Borrowings from DFIs 1,848,473 1,486,044 24.4% 1,807,472 2.3%
Short-term loans from
central banks 590,293 1,551,953 -62.0% 874,153 -32.5%
Loans and deposits from
commercial banks 897,200 896,126 0.1% 1,076,021 -16.6%
Debt securities issued 1,585,545 2,120,064 -25.2% 1,628,188 -2.6%
Total liabilities 19,486,005 16,418,589 18.7% 18,795,816 3.7%
Total equity 2,549,915 2,150,908 18.6% 2,371,137 7.5%
KEY RATIOS 4Q20 4Q19 3Q20 2020 2019
ROAA(1) 2.4% 3.4% 3.0% 1.5% 3.1%
ROAE(1) 21.3% 29.9% 26.0% 13.0% 26.1%
Net interest margin 4.4% 5.4% 4.8% 4.6% 5.6%
Liquid assets yield 3.0% 3.7% 3.3% 3.4% 3.5%
Loan yield 10.4% 11.4% 10.7% 10.5% 11.7%
Cost of funds 4.6% 4.7% 4.7% 4.7% 4.6%
Cost / income(3) 39.6% 39.3% 37.1% 39.7% 37.8%
NPLs to Gross loans to
clients 3.7% 2.1% 3.8% 3.7% 2.1%
NPL coverage ratio 76.3% 80.9% 76.8% 76.3% 80.9%
NPL coverage ratio, adjusted
for discounted value of
collateral 128.8% 139.6% 131.4% 128.8% 139.6%
Cost of credit risk ratio 0.4% 0.2% 0.2% 1.8% 0.9%
NBG (Basel III) CET1 capital
adequacy ratio 10.4% 11.5% 9.9% 10.4% 11.5%
NBG (Basel III) Tier I
capital adequacy ratio 12.4% 13.6% 12.0% 12.4% 13.6%
NBG (Basel III) Total capital
adequacy ratio 17.6% 18.1% 17.3% 17.6% 18.1%
(1) The income statement adjusted profit in 2019 excludes GEL
14.2mln one-off employee costs (net of income tax) related to
former CEO and executive management termination benefits. The
amount is comprised of GEL 12.4mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 4.0mln (gross of
income tax) excluded from non-recurring items and GEL 2.2mln tax
benefit excluded from income tax expense. 2019 ROAE and ROAA have
been adjusted accordingly
(2) Throughout this announcement, the gross loans to customers
and respective allowance for impairment are presented net of
expected credit loss (ECL) on contractually accrued interest
income. These do not have an effect on the net loans to customers
balance. Management believes that netted-off balances provide the
best representation of the loan portfolio position
(3) Cost/income ratio in 2019 is adjusted for GEL 12.4mln
one-off employee costs (gross of income tax) related to termination
benefits of former executive management
KEY RESULTS HIGHLIGHTS
-- Georgia's economy contracted by an estimated 6.5% y-o-y in
4Q20 , on the back of the new restrictions introduced by the
Government following the emergence of the second wave of the
COVID-19 cases in the autumn 2020
-- Solid quarterly performance despite the COVID-19 pandemic
second-wave impact. The Group generated profit of GEL 131.8 million
with profitability at 21.3% ROAE in the fourth quarter of 2020,
notwithstanding the slow-down of economic activity following new
restrictions put in place by the Georgian Government at the end of
November 2020, which primarily affected our Retail Banking
results
-- Net interest margin . NIM was down 100bps y-o-y and 40bps
q-o-q in 4Q20, and down 100bps y-o-y in 2020, largely reflecting
the decline in retail lending activity on the back of the economic
slow-down, and high levels of liquidity
-- Strong net fee and commission income generation in 4Q20.
Since June 2020, we have seen strong recovery dynamics, as
remittances have grown significantly and consumer demand, as
measured by banking card payment activities, has improved. VAT
turnover statistics have also demonstrated a recovery in business
activity. Although this recovery slowed-down in 4Q20 following the
new restrictions, net fee and commission income was up 0.9% y-o-y
and up 3.1% q-o-q in 4Q20
-- Operating expenses decreased by 2.2% y-o-y in 4Q20, mostly as
a result of a number of cost optimisation initiatives taken in
2Q20. That said, the Group continued its investment in IT-related
resources, digitalisation and marketing, as part of its key
strategic priorities, at the same time maintaining its focus on
efficiency and cost control, which resulted in largely flat (up
3.0% y-o-y) operating expenses in 2020. The 15.8% q-o-q increase in
operating expenses mainly related to seasonal factors
-- Loan book increased by 18.9% y-o-y and by 4.1% q-o-q at 31
December 2020. Growth on a constant-currency basis was 10.2% y-o-y
and 4.4% q-o-q. The y-o-y loan book growth partially reflected
continued strong loan origination levels in Corporate, MSME and the
mortgage segments during the pre-COVID-19 period. The q-o-q
increase reflected increased level of economic activity since June
2020, notwithstanding the slow-down following the restrictions
tightening in 4Q20
-- Client deposits and notes increased by 39.1% y-o-y and by
8.0% q-o-q at 31 December 2020. On a constant-currency basis,
client deposits and notes grew by 28.6% y-o-y and by 8.2% q-o-q.
This strong deposit franchise growth reflects a consistent increase
in monthly deposit balances of both our individual and business
customers since May 2020
-- Cost of credit risk. The cost of credit risk ratio was 0.4%
in 4Q20 (compared to 0.2% in 4Q19 and 3Q20) and was 1.8% in 2020
(compared to 0.9% in 2019). The y-o-y increase in the cost of
credit risk ratio in 2020 was primarily driven by the significant
ECL provision on loans to customers and finance lease receivables,
created for the full economic cycle during the first quarter of
2020. Our ECL assumptions were revisited to reflect the
macro-economic forecast scenarios published by the NBG in May 2020
in the second quarter, and better visibility of the portfolio and
the detailed review of creditworthiness of the borrowers in the
third and fourth quarters. As a result of these analyses, the
provisions recorded in 1Q20, proved overall to be sufficient. See
details on page 10
-- Asset quality. NPLs to gross loans were 3.7% at 31 December
2020 (2.1% at 31 December 2019 and 3.8% at 30 September 2020),
which is in line with the upfront ECL provision recorded for the
full economic cycle in 1Q20. Retail Banking NPLs to gross loans
increased to 3.5% at 31 December 2020, from 2.8% at 30 September
2020, reflecting the partial lockdown and economic slowdown in the
second quarter of 2020 , while CIB's NPLs to gross loans ratio was
down from 5.7% to 3.9% in 4Q20, on the back of recoveries during
the quarter. The NPL coverage ratio was 76.3% at 31 December 2020
(80.9% at 31 December 2019 and 76.8% at 30 September 2020), and the
NPL coverage ratio adjusted for a discounted value of collateral
was 128.8% at 31 December 2020 (139.6% at 31 December 2019 and
131.4% at 30 September 2020). The y-o-y decline in NPL coverage
ratio reflects the portfolio mix shift from high-yielding unsecured
to more secured consumer lending, and is supported by the high
level of collateralisation of our loan book
-- Strong capital adequacy position. The Bank's capital adequacy
ratios have remained robust, and comfortably above the minimum
regulatory requirements. The Bank's Basel III Common Equity Tier 1,
Tier 1 and Total capital adequacy ratios stood at 10.4%, 12.4% and
17.6%, respectively, all well above the minimum required levels of
7.4%, 9.2% and 13.8%, respectively, at 31 December 2020. The y-o-y
decline in capital ratios was primarily due to a c.GEL 400mln
general provision created in March 2020 under the local regulatory
accounting basis in agreement with the NBG (and consistent with the
NBG's guidance for the Georgian banking sector in general) that
covers its current expectations of estimated credit losses on the
Bank's lending book for the whole economic cycle. Q-o-q increase in
capital ratios was primarily driven by strong internal capital
generation, partially offset by business growth during the quarter.
See details on capital adequacy ratio movement during the fourth
quarter of 2020 on page 11
-- Strong liquidity and funding positions. As at 31 December
2020, the Bank's liquidity coverage ratio stood at 138.6% and net
stable funding ratio at 137.5%, compared to the 100% minimum
required level. The Bank maintained substantial excess liquidity in
2020, primarily for 1) the repayment of local currency bonds in
June 2020 ; and 2) risk mitigation purposes on the back of the
ongoing COVID-19 crisis, as outflow of customer funds was possible
at the early stage of the pandemic outbreak, which however did not
materialise. Client deposit balances continue to grow strongly,
despite two rounds of decrease of interest rates on foreign
currency denominated customer deposits in the second half of
2020
CHIEF EXECUTIVE OFFICER'S STATEMENT
2020 was a year of unprecedented difficulties for all
organisations across the world. For Bank of Georgia Group, the
global pandemic has created significant challenges to manage
through, while safeguarding the health and safety of our employees
and customers. I am proud of the way the management team and all of
our colleagues have responded to what remain ongoing challenges as
we move into 2021. Bank of Georgia Group continues to play a
fundamentally important role in supporting our customers, our
communities, and the Georgian economy.
The partial lockdown restrictions put in place at the end of
November 2020 in response to the second-wave of the COVID-19 cases
has led Georgia's economy to contract by an estimated 6.5% y-o-y in
4Q20. Remittances, however, remained strong, growing by 15.7% y-o-y
in 4Q20, which, combined with an improved trade deficit and the NBG
interventions, stabilised the local currency. Annual inflation
dropped to 2.4% in December 2020, mainly reflecting utility
subsidies by the Government for low-energy consumers. Georgia's
international reserves reached US$3.9 billion at 31 December 2020,
on the back of increased donor funding. We currently expect the
Georgian economy to grow by an estimated 5.0% in 2021, supported by
the gradual lifting of restrictions, the start of a vaccination
roll-out, and a partial return of international tourists later in
2021. In a downside scenario, assuming slow return in tourism, the
economic growth is expected at around 3.6% in 2021.
Notwithstanding the partial lockdown since the end of November
2020, which primarily affected our Retail Banking operations, the
Group delivered strong profitability in the fourth quarter of 2020.
Our return on average equity was 21.3% in 4Q20, and we delivered a
return on average equity in excess of 20% in each of the last three
quarters of the year. Our customer franchise has been extremely
resilient, translating into strong customer lending and deposit
growth during the fourth quarter of 2020. Having taken a
significant up-front COVID-19-related expected credit loss
provision for the full economic cycle in the first quarter of 2020,
the quality of our loan book has remained robust throughout the
second-round lockdown in December 2020 and January 2021. The NPLs
to gross loans remained stable at 3.7% in the fourth quarter,
compared with 3.8% in 3Q20. In the fourth quarter, following an
in-depth analysis of our customer lending portfolios, we raised
additional provisions on loans to customers and finance lease
receivables and guarantees issued, and our overall cost of risk
increased quarter on quarter from GEL 10.9 million to GEL 38.4
million. During the pandemic second-wave, our retail customers'
reliance on loan payment holidays has increased, with c.4.3% of our
retail lending portfolio (excluding MSME portfolio) now using these
payment holidays. The corporate lending portfolio continues to
perform well, and in line with expectations, which is also
reflected in NPL levels in the fourth quarter.
Bank of Georgia's performance was very resilient in the fourth
quarter of 2020:
-- The balance sheet has remained strong with better than
expected levels of growth. On a constant currency basis, our
customer lending increased by 4.4%, and client deposits and notes
increased by 8.2% q-o-q at 31 December 2020
-- Operating income performance has been robust . Net fee and
commission income increased by 3.1% q-o-q in 4Q20, despite the
second-wave lockdown-related reduction in economic activity, with
net interest income remaining broadly flat
-- Net interest margin was down 40 basis points
quarter-on-quarter in 4Q20, to 4.4%, largely reflecting the
decrease in economic activity in 4Q20. We expect the net interest
margin to remain broadly stable going forward
-- Our lending portfolio has performed well. We have performed
individual in-depth review of all of our SME and corporate
borrowers, and remain adequately provided for our overall expected
credit losses relating to the COVID-19 pandemic
-- Costs remained well-managed with a 2.2% year-on-year
reduction in operating expenses in 4Q20, following a review of our
variable cost base in 2Q20. We have limited our year-on-year growth
in 2020 to 3.0%, despite a number of incremental operating expenses
related to the pandemic and continued investment in building our
digital and core franchise capabilities
-- Our capital ratios have remained robust , comfortably above
minimum regulatory requirements. The high level of internal capital
generation supported the strong business growth in the quarter,
resulting in a 50bps q-o-q increase in the CET1 ratio
-- Delivering superior levels of profitability. In 4Q20, our
annualised return on average equity was 21.3%
We have continued to focus on developing our digital platforms,
and added new innovative features to mBank in 2020, including
peer-to-peer payments, and bill split and money request
functionalities, among others. We saw a remarkable 39.7% increase
in the number of active mBank users in 2020, with more than a third
using it on a daily basis. The number of mBank transactions was up
74.0%, and the volume of transactions almost doubled year-on-year
in 2020. With our market leading payments franchise and the
popularity of our financial mobile app, combined with our rigorous
focus on customer satisfaction and employee empowerment, we have
laid a robust groundwork for the bank of the future.
Our two clear medium-term strategic targets remain unchanged:
achieve at least 20% return on average equity and deliver c.15%
growth of the loan book. These results are consistent with the
targets notwithstanding the adverse impact of the pandemic
second-wave. Bank of Georgia Group remains extremely resilient,
with a robust balance sheet and capital position, and we continue
to make significant progress with our digital transformation. We
expect Georgia to return to economic growth in 2021, and we are
very well-positioned to both contribute to and benefit from
this.
Archil Gachechiladze,
CEO, Bank of Georgia Group PLC
24 February 2021
DISCUSSION OF RESULTS
The Group's business is composed of three segments. (1) Retail
Banking operations in Georgia principally provides consumer loans,
mortgage loans, overdrafts, credit cards and other credit
facilities, funds transfer and settlement services, and handling
customers' deposits for both individuals as well as legal entities.
Retail Banking targets mass retail and mass affluent segments,
together with small and medium enterprises and micro businesses.
(2) Corporate and Investment Banking comprises Corporate Banking
and Investment Management operations in Georgia. Corporate Banking
principally provides loans and other credit facilities, funds
transfers and settlement services, trade finance services,
documentary operations support and handles saving and term deposits
for corporate and institutional customers. The Investment
Management business principally provides private banking services
to high net worth clients. (3) BNB, comprising JSC Belarusky
Narodny Bank, principally provides retail and corporate banking
services to clients in Belarus.
OPERATING INCOME
GEL thousands, unless
otherwise Change Change Change
noted 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
Interest income 420,398 393,480 6.8% 407,666 3.1% 1,595,427 1,437,161 11.0%
Interest expense (218,802) (186,389) 17.4% (203,636) 7.4% (817,785) (647,742) 26.3%
Net interest income 201,596 207,091 -2.7% 204,030 -1.2% 777,642 789,419 -1.5%
Fee and commission
income 77,382 77,472 -0.1% 71,793 7.8% 274,458 284,193 -3.4%
Fee and commission
expense (30,424) (30,914) -1.6% (26,261) 15.9% (108,955) (104,179) 4.6%
Net fee and commission
income 46,958 46,558 0.9% 45,532 3.1% 165,503 180,014 -8.1%
Net foreign currency
gain 26,457 37,177 -28.8% 19,179 37.9% 99,040 119,363 -17.0%
Net other income 25,016 18,439 35.7% 7,750 NMF 48,474 21,474 125.7%
Operating income 300,027 309,265 -3.0% 276,491 8.5% 1,090,659 1,110,270 -1.8%
Net interest margin 4.4% 5.4% 4.8% 4.6% 5.6%
Average interest
earning
assets 18,211,749 15,314,647 18.9% 16,928,476 7.6% 16,870,166 14,054,069 20.0%
Average interest
bearing
liabilities 18,732,227 15,886,722 17.9% 17,323,145 8.1% 17,292,171 14,203,556 21.7%
Average net loans and
finance
lease receivables,
currency
blended 13,848,691 11,762,692 17.7% 12,997,553 6.5% 12,966,440 10,563,962 22.7%
Average net loans
and finance
lease
receivables, GEL 5,603,018 4,844,367 15.7% 5,141,167 9.0% 5,193,750 4,229,668 22.8%
Average net loans
and finance
lease
receivables, FC 8,245,673 6,918,325 19.2% 7,856,386 5.0% 7,772,690 6,334,294 22.7%
Average client
deposits and
notes, currency
blended 13,272,191 9,986,276 32.9% 12,252,445 8.3% 11,773,198 9,076,632 29.7%
Average client
deposits
and notes, GEL 4,943,412 3,093,464 59.8% 4,506,618 9.7% 4,104,920 2,904,441 41.3%
Average client
deposits
and notes, FC 8,328,779 6,892,812 20.8% 7,745,827 7.5% 7,668,278 6,172,191 24.2%
Average liquid assets,
currency
blended 6,460,344 5,287,479 22.2% 5,708,834 13.2% 5,691,417 4,767,599 19.4%
Average liquid
assets, GEL 2,661,240 2,207,009 20.6% 2,409,989 10.4% 2,401,482 2,106,672 14.0%
Average liquid
assets, FC 3,799,104 3,080,470 23.3% 3,298,845 15.2% 3,289,935 2,660,927 23.6%
Liquid assets yield,
currency
blended 3.0% 3.7% 3.3% 3.4% 3.5%
Liquid assets
yield, GEL 7.1% 7.3% 7.7% 7.6% 6.6%
Liquid assets
yield, FC 0.0% 1.3% 0.1% 0.3% 1.1%
Loan yield, currency
blended 10.4% 11.4% 10.7% 10.5% 11.7%
Loan yield, GEL 15.2% 16.3% 15.6% 15.3% 17.0%
Loan yield, FC 7.1% 7.9% 7.5% 7.4% 8.1%
Cost of funds,
currency blended 4.6% 4.7% 4.7% 4.7% 4.6%
Cost of funds, GEL 7.7% 7.5% 7.8% 7.9% 7.0%
Cost of funds, FC 2.9% 3.0% 3.0% 3.0% 3.2%
Cost / income (4) 39.6% 39.3% 37.1% 39.7% 37.8%
(4) The cost/income ratio in 2019 is adjusted for GEL 12.4mln
one-off employee costs (gross of income tax) related to termination
benefits of former executive management
Performance highlights
-- The Group generated solid operating income of GEL 300.0mln in
4Q20 (down 3.0% y-o-y and up 8.5% q-o-q), ending 2020 with
operating income of GEL 1,090.7mln (down 1.8% y-o-y). The y-o-y
decrease in operating income in 4Q20 and in 2020 was primarily
driven by the slow-down in economic activity due to the COVID-19
pandemic, particularly affecting the Retail Banking segment. Robust
q-o-q growth in operating income in 4Q20 was mainly due to increase
in net other income, coupled with increase in net fee and
commission income (up 3.1% q-o-q) and net foreign currency gains
(up 37.9% q-o-q), as a result of recovery in customer activity
since June 2020. This recovery slowed-down in 4Q20 following the
new restrictions put in place by the Georgian Government to respond
to the emerging COVID-19 second-wave
-- Our NIM was 4.4% in 4Q20 (down 100bps y-o-y and down 40bps
q-o-q) and 4.6% in 2020 (down 100bps y-o-y). The NIM decrease
primarily reflected a decline in currency blended loan yields (down
100bps y-o-y and down 30bps q-o-q in 4Q20, and down 120bps y-o-y in
2020), on the back of the slower consumer lending activity due to
the COVID-19 pandemic, and the effect of change in portfolio mix
resulting in higher level of secured mortgage lending. On the other
hand, despite the higher levels of liquidity, cost of funds were
down 10bps y-o-y and q-o-q in 4Q20, and slightly up by 10bps y-o-y
in 2020. The latter reflected the increase in client deposits and
notes and higher levels of liquidity, coupled with the NBG's
monetary policy rate changes, partially offset by the impact of the
GEL 500 million local currency bonds repayment in June 2020
-- Liquid assets yield. Currency blended liquid assets yield was
3.0% in 4Q20 (down 70bps y-o-y and down 30bps q-o-q) and 3.4% in
2020 (down 10bps y-o-y). The local currency denominated liquid
assets yield movement (down 20bps y-o-y and down 60bps q-o-q in
4Q20, and up 100bps y-o-y in 2020) directly reflected the NBG's
monetary policy rate changes ( NBG increased monetary policy rate
by cumulative of 250bps since September 2019, although reduced the
policy rate three times by a cumulative 100bps in the second and
third quarters of 2020). The foreign currency denominated liquid
assets yield reduction (down 130bps y-o-y and down 10bps q-o-q in
4Q20, and down 80bps y-o-y in 2020), largely reflected the cut in
US Fed rate in March 2020 (NBG accrues interest rate on banks' US
Dollar obligatory reserves at US Fed rate upper bound minus
50bps)
-- Cost of funds. Cost of funds was 4.6% in 4Q20 (down 10bps
y-o-y and q-o-q) and 4.7% in 2020 (up 10bps y-o-y). These changes
were primarily driven by the movement of local currency denominated
cost of funds (up 20bps y-o-y and down 10bps q-o-q in 4Q20, and up
90bps y-o-y in 2020), which reflected the NBG's monetary policy
rate changes, and the impact of the repayment of the GEL 500
million local currency bonds due in the beginning of June 2020. In
addition, the y-o-y increase in local currency denominated cost of
funds in 4Q20 was driven by increase in the cost of client deposits
and notes. The decrease in the foreign currency denominated cost of
funds (down 10bps y-o-y and q-o-q in 4Q20, and down 20bps y-o-y in
2020) was in line with the Libor rate decline during 2020
-- Net fee and commission income. Net fee and commission income
was GEL 47.0mln in 4Q20 (up 0.9% y-o-y and up 3.1% q-o-q) and GEL
165.5mln in 2020 (down 8.1% y-o-y). The y-o-y decline in net fee
and commission income in 2020 was mainly driven by the decrease of
income from settlement and cash operations, due to slower customer
activity as a result of the COVID-19 pandemic in 2Q20 and the
temporary removal of fees on transactions executed through our
mobile and internet banking platforms during the hard lockdown in
the spring of 2020, for a two-month period, aimed at incentivising
the use of digital channels. This decline was partially offset by
the strong net fees and commission income generation from
guarantees and letters of credit issued by our Corporate and
Investment Banking business
-- Net foreign currency gain. Net foreign currency gain was down
28.8% y-o-y and up 37.9% q-o-q in 4Q20, and was down 17.0% y-o-y in
2020. The movement in net foreign currency gain directly reflected
the level of currency volatility and customer-driven flows. Lower
net foreign currency gain from our subsidiary in Belarus also
contributed to the overall y-o-y decline both in 4Q20 and 2020
-- Net other income. Net other income increased significantly in
all periods presented, primarily reflecting GEL 18.0mln net gains
recorded as a result of the revaluation of investment property in
4Q20, mainly driven by the local currency devaluation in 2020. In
addition, higher income from operating leases, as well as higher
net gains from the sale of investment property also contributed to
y-o-y increase in net other income in 2020. Furthermore, the Group
recorded net losses from derivative financial instruments (interest
rate swap hedges) in 2019
NET OPERATING INCOME BEFORE NON-RECURRING ITEMS; COST OF RISK; PROFIT(5)
GEL thousands, unless Change Change Change
otherwise noted (6) 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
Salaries and other employee
benefits (64,243) (61,504) 4.5% (58,171) 10.4% (239,607) (231,443) 3.5%
Administrative expenses (31,617) (35,131) -10.0% (24,443) 29.3% (105,531) (106,157) -0.6%
Depreciation, amortisation
and impairment (21,283) (23,815) -10.6% (19,125) 11.3% (82,937) (78,118) 6.2%
Other operating expenses (1,714) (1,095) 56.5% (873) 96.3% (4,560) (4,228) 7.9%
Operating expenses (118,857) (121,545) -2.2% (102,612) 15.8% (432,635) (419,946) 3.0%
Profit from associate 154 153 0.7% 214 -28.0% 782 789 -0.9%
Operating income before
cost of risk 181,324 187,873 -3.5% 174,093 4.2% 658,806 691,113 -4.7%
Expected credit loss
on loans to customers (14,579) (7,985) 82.6% (5,836) 149.8% (236,983) (94,155) 151.7%
Expected credit loss
on finance lease
receivables (381) 451 NMF (2,371) -83.9% (8,025) (885) NMF
Other expected credit
loss and impairment charge
on other assets and
provisions (23,471) (6,698) NMF (2,735) NMF (55,989) (12,544) NMF
Cost of risk (38,431) (14,232) NMF (10,942) NMF (300,997) (107,584) NMF
Net operating income
before non-recurring
items 142,893 173,641 -17.7% 163,151 -12.4% 357,809 583,529 -38.7%
Net non-recurring items 21 (1,591) NMF 254 -91.7% (41,311) (10,723) NMF
Profit before income
tax and one-off costs 142,914 172,050 -16.9% 163,405 -12.5% 316,498 572,806 -44.7%
Income tax expense (11,065) (15,515) -28.7% (15,051) -26.5% (21,555) (58,619) -63.2%
Profit adjusted for one-off
costs 131,849 156,535 -15.8% 148,354 -11.1% 294,943 514,187 -42.6%
One-off termination costs - - - - - - (14,236) NMF
of former CEO and executive
management (after tax)
Profit 131,849 156,535 -15.8% 148,354 -11.1% 294,943 499,951 -41.0%
(5) In 2020, the Group allocated holding company operation
results to the respective segments (Retail Banking, Corporate and
Investment Banking, and BNB). The comparative periods were not
restated as the change was not material and the information is
deemed still comparable
(6) The adjusted profit in the table in 2019 excludes GEL
14.2mln one-off employee costs (gross of income tax) related to the
former CEO and executive management termination benefits. The
amount is comprised of GEL 12.4mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 4.0mln (gross of
income tax) excluded from non-recurring items and GEL 2.2mln tax
benefit excluded from income tax expense
-- Operating expenses amounted to GEL 118.9mln in 4Q20, down
2.2% y-o-y and up 15.8% q-o-q, and GEL 432.6mln in 2020, up by 3.0%
y-o-y. In 2020, we continued investments in IT-related resources as
part of the Agile transformation process, focus on digitalisation
and investments in marketing. In addition, we incurred
extraordinary expenses during 2020 in relation to the safety
measures implemented as a response to the COVID-19 outbreak. That
said, in the second quarter of 2020, we initiated a number of cost
optimisation measures, which enabled us to maintain operating
expenses largely flat y-o-y in 2020. The q-o-q increase in
operating expenses in 4Q20 was largely related to seasonal
factors
-- Cost of risk. The cost of credit risk ratio stood at 0.4% in
4Q20 (compared to 0.2% in 4Q19 and 3Q20) and was 1.8% in 2020
(compared to 0.9% in 2019). The significant increase in cost of
credit risk ratio in 2020 was driven by the 1Q20 reserve builds,
created for the full economic cycle, primarily related to the
deterioration in the macro-economic environment and expected
creditworthiness of borrowers due to the COVID-19 pandemic impact.
As a result of these assumptions, we created additional reserves of
GEL 220.2mln in the first quarter of 2020. In the second quarter,
management revisited the assumptions used to estimate the amount of
ECL provision to reflect the better visibility and the
macro-economic forecast scenarios published by the NBG in May 2020
(see Group's 2Q20 and 1H20 results announcement for details of
assumptions used). In the third and fourth quarters of 2020, the
Group has completed additional in-depth analysis of the financial
standing and creditworthiness of all corporate and SME borrowers,
and a significant portion of retail and micro segment customers. As
a result, additional ECL provisions on loans to customers and
finance lease receivables in the amount of GEL 13.5mln were
recorded for Retail Banking business, and GEL 4.4mln in CIB segment
in 4Q20. Given that we are operating in a rapidly changing
environment with a high level of uncertainty with regard to both
the length and the severity of the COVID-19 second-wave impact, we
will continue to monitor new facts and circumstances on a
continuous basis.
As for the other expected credit loss and impairment charge on
other assets and provisions of GEL 23.5mln in 4Q20, this mainly
comprised additional reserves recorded by the Group in respect of
assets held for sale, guarantees issued and other financial assets,
and expenses accrued for certain legal fees
-- Quality of the loan book . The y-o-y rise in non-performing
borrowers in 4Q20 was primarily driven by the COVID-19 pandemic
impact, resulting in an increase of NPLs to gross loans to 3.7% at
31 December 2020, which is in line with the upfront ECL provision
recorded for the full economic cycle in 2020. Retail Banking NPLs
to gross loans ratio increased to 3.5% at 31 December 2020,
reflecting the partial lockdown and economic slowdown in the second
quarter of 2020, while CIB's NPLs to gross loans ratio was down
from 5.7% at 30 September 2020 to 3.9% at 31 December 2020, on the
back of recoveries during the quarter.
The y-o-y decline in NPL coverage ratio reflects the shift of
portfolio mix from high-yielding unsecured to more secured consumer
lending, and is supported by the high level of collateralisation of
our loan book. The NPL coverage ratio adjusted for discounted value
of collateral was 128.8% at 31 December 2020
GEL thousands, unless otherwise Dec-20 Dec-19 Change Sep-20 Change
noted y-o-y q-o-q
NON-PERFORMING LOANS
NPLs 545,837 252,695 116.0% 530,631 2.9%
NPLs to gross loans 3.7% 2.1% 3.8%
NPLs to gross loans, RB 3.5% 1.5% 2.8%
NPLs to gross loans, CIB 3.9% 3.0% 5.7%
NPL coverage ratio 76.3% 80.9% 76.8%
NPL coverage ratio adjusted for
the discounted value of collateral 128.8% 139.6% 131.4%
-- BNB - the Group's banking subsidiary in Belarus - continues
to remain strongly capitalised , with capital adequacy ratios well
above the requirements of the National Bank of the Republic of
Belarus ("NBRB"). At 31 December 2020, total capital adequacy ratio
was 13.9%, well above the 12.5% minimum requirement, while Tier I
capital adequacy ratio was 9.3%, again above the NBRB's 7.0%
minimum requirement. ROAE was 19.1% in 4Q20 (16.7% in 4Q19 and 2.2%
in 3Q20) and 8.4% in 2020 (14.5% in 2019), reflecting the COVID-19
pandemic impact. For financial results highlights of BNB, see page
21. We continue to monitor the political situation in Belarus
closely. There has so far been no material impact on the
performance of our business in Belarus
-- Net non-recurring items. Significant y-o-y increase in net
non-recurring items during 2020 was primarily attributable to GEL
38.7mln and GEL 1.0mln one-off net losses on modification of
financial assets recorded in March and April of 2020, respectively.
These losses related to the three-month payment holidays on
principal and interest payments offered to our retail banking
clients, in order to reduce the requirement for customers to
physically visit Bank branches and reduce the risk of COVID-19
virus spread. See Group's 2Q20 and 1H20 results announcement for
details. In addition, in 1Q20, the Bank incurred GEL 1.2mln one-off
costs to finance and donate 20,000 COVID-19 laboratory tests, 10
ventilators, 50,000 face masks and 60,000 gloves to the Ministry of
Health of Georgia, to support the battle to prevent the virus
spread. These costs are classified as non-recurring items
-- Income tax expense. Relatively high income tax rate in 2019
was primarily driven by a one-off GEL 8.5mln additional tax expense
posted in the third quarter of 2019 as a result of reassessment of
deferred tax balances. See Group's 3Q19 and 9M19 results
announcement for details
-- Overall, the Group recorded profit of GEL 131.8mln in 4Q20
(GEL 156.5mln in 4Q19 and GEL 148.4mln in 3Q20) and GEL 294.9mln in
2020 (compared to profit adjusted for one-off costs of GEL
514.2mln(7) in 2019). The Group's ROAE was 21.3% in 4Q20 (29.9% in
4Q19 and 26.0% in 3Q20) and 13.0% in 2020 (26.1%(7) in 2019)
(7) Profit and ROAE in 2019 exclude GEL 14.2mln one-off employee
costs (gross of income tax) related to the former CEO and executive
management termination benefits
BALANCE SHEET HIGHLIGHTS
GEL thousands, unless otherwise Dec-20 Dec-19 Change Sep-20 Change
noted y-o-y q-o-q
Liquid assets 6,531,357 5,559,500 17.5% 6,339,663 3.0%
Liquid assets, GEL 2,694,091 2,245,740 20.0% 2,567,410 4.9%
Liquid assets, FC 3,837,266 3,313,760 15.8% 3,772,253 1.7%
Net loans and finance lease receivables 14,192,078 11,931,262 18.9% 13,627,144 4.1%
Net loans and finance lease receivables,
GEL 5,803,576 4,946,387 17.3% 5,368,636 8.1%
Net loans and finance lease receivables,
FC 8,388,502 6,984,875 20.1% 8,258,508 1.6%
Client deposits and notes 14,020,209 10,076,735 39.1% 12,985,039 8.0%
Amounts owed to credit institutions 3,335,966 3,934,123 -15.2% 3,757,646 -11.2%
Borrowings from DFIs 1,848,473 1,486,044 24.4% 1,807,472 2.3%
Short-term loans from central banks 590,293 1,551,953 -62.0% 874,153 -32.5%
Loans and deposits from commercial
banks 897,200 896,126 0.1% 1,076,021 -16.6%
Debt securities issued 1,585,545 2,120,064 -25.2% 1,628,188 -2.6%
LIQUIDITY AND CAPITAL ADEQUACY RATIOS
Net loans / client deposits and
notes 101.2% 118.4% 104.9%
Net loans / client deposits and
notes + DFIs 89.4% 103.2% 92.1%
Liquid assets / total assets 29.6% 29.9% 30.0%
Liquid assets / total liabilities 33.5% 33.9% 33.7%
NBG liquidity coverage ratio 138.6% 136.7% 147.0%
NBG (Basel III) CET1 capital adequacy
ratio 10.4% 11.5% 9.9%
NBG (Basel III) Tier I capital adequacy
ratio 12.4% 13.6% 12.0%
NBG (Basel III) Total capital adequacy
ratio 17.6% 18.1% 17.3%
Our balance sheet remains highly liquid (NBG liquidity coverage
ratio of 138.6%) and strongly capitalised (NBG Basel III Tier I
capital adequacy ratio of 12.4%) with a well-diversified funding
base (client deposits and notes to total liabilities of 72.0%) at
31 December 2020.
-- Liquidity. Liquid assets reached GEL 6,531.4mln at 31
December 2020, up 17.5% y-o-y and up 3.0% q-o-q. The notable
increase over the year was in investment securities, combined with
excess liquidity deployed with credit institutions. The Bank
maintained substantial excess liquidity since the second quarter of
2020 primarily for 1) the repayment of local currency bonds in June
2020 ; and 2) risk mitigation purposes on the back of the current
COVID-19 crisis, as outflow of customer funds was possible at the
early stage of the pandemic outbreak, which however did not
materialise. Client deposit balances continue to grow to date,
despite two rounds of decrease of interest rates on foreign
currency denominated customer deposits in the second half of 2020.
The NBG Liquidity coverage ratio was 138.6% at 31 December 2020
(136.7% at 31 December 2019 and 147.0% at 30 September 2020), well
above the 100% minimum requirement level
-- Loan book. Our net loan book and finance lease receivables
amounted to GEL 14,192.1mln at 31 December 2020 (up 18.9% y-o-y and
up 4.1% q-o-q). As of 31 December 2020, the retail loan book
represented 65.2% of the total loan portfolio (66.0% at 31 December
2019 and 65.7% 30 September 2020). Both local and foreign currency
portfolios experienced strong y-o-y growth of 17.3% and 20.1%,
respectively. Furthermore, local currency denominated portfolio
increased by 8.1% and foreign currency denominated loan portfolio
went up by 1.6% q-o-q. The local currency loan portfolio growth was
partially driven by the Government's de-dollarisation initiatives
and our goal to increase the share of local currency loans in our
portfolio
-- Net loans to customer funds and DFI ratio . Our net loans to
customer funds and DFI ratio, which is closely monitored by
management, stood at 89.4% at 31 December 2020 (103.2% at 31
December 2019 and 92.1% at 30 September 2020)
-- Diversified funding base . Debt securities issued decreased
by 25.2% y-o-y and by 2.6% q-o-q at 31 December 2020. The y-o-y
decrease was attributable to the repayment of GEL 500mln local
currency bonds at the beginning of June 2020, while the q-o-q
decrease in debt securities was mainly due to the slight
appreciation of the local currency in 4Q20
-- Solid capital position. At 31 December 2020, following the
measures put in place by the NBG as part of the COVID-19
supervisory plan in March 2020 (see details in Group's 1Q20 results
announcement), the Bank's Basel III Common Equity Tier 1, Tier 1
and Total capital adequacy ratios stood at 10.4%, 12.4% and 17.6%,
respectively, all comfortably above the minimum required levels of
7.4%, 9.2% and 13.8%, respectively. The movement in capital
adequacy ratios in 4Q20, and the potential impact of an additional
10% devaluation of local currency on different levels of capital is
as follows:
30 September Business 4Q20 GEL devaluation 31 December Potential
2020 growth profit 2020 impact of
additional
10%
GEL devaluation
------------ -------- ------- --------------- ----------- ----------------
CET1 capital adequacy
ratio 9.9% -0.5% 1.0% - 10.4% -0.7%
Tier I capital adequacy
ratio 12.0% -0.6% 1.0% - 12.4% -0.6%
Total capital adequacy
ratio 17.3% -0.7% 1.0% - 17.6% -0.5%
DISCUSSION OF SEGMENT RESULTS
RETAIL BANKING (RB)
Retail Banking provides consumer loans, mortgage loans,
overdrafts, credit card facilities and other credit facilities as
well as funds transfer and settlement services and the handling of
customer deposits for both individuals and legal entities (SME and
micro businesses only). RB is represented by the following
sub-segments: (1) mass retail segment, (2) SME and micro businesses
- MSME, and (3) the mass affluent segment (through our SOLO
brand).
GEL thousands, unless
otherwise Change Change Change
noted 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
INCOME STATEMENT
HIGHLIGHTS(8)
Net interest income 125,969 134,839 -6.6% 126,837 -0.7% 473,738 545,701 -13.2%
Net fee and commission
income 34,660 32,775 5.8% 34,744 -0.2% 120,985 136,510 -11.4%
Net foreign currency gain 13,477 14,795 -8.9% 14,245 -5.4% 56,879 51,009 11.5%
Net other income 13,918 9,233 50.7% 3,477 NMF 23,390 8,230 NMF
Operating income 188,024 191,642 -1.9% 179,303 4.9% 674,992 741,450 -9.0%
Salaries and other employee
benefits (44,821) (39,683) 12.9% (40,481) 10.7% (167,696) (147,982) 13.3%
Administrative expenses (24,339) (22,593) 7.7% (18,199) 33.7% (80,169) (70,968) 13.0%
Depreciation, amortisation
and impairment (17,828) (20,383) -12.5% (15,704) 13.5% (69,031) (66,136) 4.4%
Other operating expenses (1,087) (625) 73.9% (510) 113.1% (2,696) (2,286) 17.9%
Operating expenses (88,075) (83,284) 5.8% (74,894) 17.6% (319,592) (287,372) 11.2%
Profit from associate 154 153 0.7% 214 -28.0% 782 789 -0.9%
Operating income before
cost of risk 100,103 108,511 -7.7% 104,623 -4.3% 356,182 454,867 -21.7%
Cost of risk (18,986) (7,118) NMF (16,238) 16.9% (183,061) (89,879) 103.7%
Net operating income before
non-recurring items 81,117 101,393 -20.0% 88,385 -8.2% 173,121 364,988 -52.6%
Net non-recurring items 149 68 119.1% 219 -32.0% (39,811) (846) NMF
Profit before income tax
and one-off costs 81,266 101,461 -19.9% 88,604 -8.3% 133,310 364,142 -63.4%
Income tax expense (5,218) (8,910) -41.4% (7,508) -30.5% (4,724) (35,396) -86.7%
Profit adjusted for one-off
costs 76,048 92,551 -17.8% 81,096 -6.2% 128,586 328,746 -60.9%
One-off termination costs - - - - - - (10,142) NMF
of former CEO and executive
management (after tax)
Profit 76,048 92,551 -17.8% 81,096 -6.2% 128,586 318,604 -59.6%
BALANCE SHEET HIGHLIGHTS
Net loans, currency blended 8,734,706 7,427,721 17.6% 8,416,503 3.8% 8,734,706 7,427,721 17.6%
Net loans, GEL 4,809,383 4,181,192 15.0% 4,551,436 5.7% 4,809,383 4,181,192 15.0%
Net loans, FC 3,925,323 3,246,529 20.9% 3,865,067 1.6% 3,925,323 3,246,529 20.9%
Client deposits, currency
blended 7,101,743 5,712,535 24.3% 6,699,215 6.0% 7,101,743 5,712,535 24.3%
Client deposits, GEL 2,224,163 1,829,133 21.6% 2,068,516 7.5% 2,224,163 1,829,133 21.6%
Client deposits, FC 4,877,580 3,883,402 25.6% 4,630,699 5.3% 4,877,580 3,883,402 25.6%
of which:
Time deposits, currency
blended 4,262,597 3,221,741 32.3% 4,077,658 4.5% 4,262,597 3,221,741 32.3%
Time deposits, GEL 1,025,442 817,879 25.4% 1,034,423 -0.9% 1,025,442 817,879 25.4%
Time deposits, FC 3,237,155 2,403,862 34.7% 3,043,235 6.4% 3,237,155 2,403,862 34.7%
Current accounts and demand
deposits, currency blended 2,839,146 2,490,794 14.0% 2,621,557 8.3% 2,839,146 2,490,794 14.0%
Current accounts and demand
deposits, GEL 1,198,721 1,011,254 18.5% 1,034,093 15.9% 1,198,721 1,011,254 18.5%
Current accounts and demand
deposits, FC 1,640,425 1,479,540 10.9% 1,587,464 3.3% 1,640,425 1,479,540 10.9%
KEY RATIOS
ROAE (8) 22.0% 31.4% 25.0% 10.0% 28.6%
Net interest margin,
currency
blended 4.5% 5.7% 4.8% 4.5% 6.1%
Cost of credit risk ratio 0.6% 0.2% 0.8% 2.1% 1.2%
Cost of funds, currency
blended 5.5% 5.3% 5.7% 5.7% 5.2%
Loan yield, currency blended 11.2% 12.4% 11.7% 11.4% 12.9%
Loan yield, GEL 15.4% 16.7% 15.8% 15.4% 17.6%
Loan yield, FC 6.0% 6.8% 6.7% 6.5% 7.3%
Cost of deposits, currency
blended 2.9% 2.5% 3.1% 2.9% 2.6%
Cost of deposits, GEL 6.0% 5.1% 6.3% 6.1% 5.1%
Cost of deposits, FC 1.5% 1.4% 1.5% 1.4% 1.5%
Cost of time deposits,
currency blended 4.0% 3.8% 4.3% 4.1% 3.9%
Cost of time deposits,
GEL 9.8% 8.6% 10.1% 9.9% 8.6%
Cost of time deposits,
FC 2.1% 2.2% 2.2% 2.2% 2.3%
Current accounts and demand
deposits, currency blended 1.1% 0.9% 1.1% 1.0% 1.0%
Current accounts and demand
deposits, GEL 2.3% 2.2% 2.4% 2.3% 2.2%
Current accounts and demand
deposits, FC 0.2% 0.1% 0.2% 0.2% 0.2%
Cost / income ratio (9) 46.8% 43.5% 41.8% 47.3% 38.8%
(8) The income statement adjusted profit in 2019 excludes GEL
10.1mln one-off employee costs (net-off income tax) related to the
former CEO and executive management termination benefits. The
amount is comprised of GEL 8.6mln (gross of income tax) excluded
from salaries and other employee benefits, GEL 2.9mln (gross of
income tax) excluded from non-recurring items and GEL 1.4mln tax
benefit excluded from income tax expense. 2019 ROAE has been
adjusted accordingly
(9) The cost/income ratio in 2019 is adjusted for GEL 8.6mln
one-off employee costs (gross of income tax) related to termination
benefits of former executive management
Performance highlights
-- Retail Banking generated operating income of GEL 188.0mln in
4Q20 (down 1.9% y-o-y and up 4.9% q-o-q) and GEL 675.0mln in 2020
(down 9.0% y-o-y) , mostly reflecting the COVID-19 pandemic impact
since March 2020 and improving trends in key economic indicators
and rebound in customer activity since June 2020, albeit this
recovery slowed-down in 4Q20 following the new restrictions put in
place by the Government to respond to emerging COVID-19 cases
increase
-- Retail Banking net interest income was down 6.6% y-o-y and
down 0.7% q-o-q in 4Q20, and was down 13.2% y-o-y in 2020. RB NIM
was 4.5% in 4Q20 and in 2020 (down 120bps y-o-y and down 30bps
q-o-q in 4Q20, and down 160bps y-o-y in 2020). The decline in NIM
in 4Q20 and 2020 was mostly attributable to lower loan yields (down
120bps y-o-y and down 50bps q-o-q in 4Q20, and down 150bps y-o-y in
2020), primarily reflecting the slow-down of economic activity on
the back of COVID-19 pandemic outbreak in March 2020, as well as
the effect of change in portfolio mix resulting in higher level of
secured mortgage lending . Retail Banking net interest income still
benefited from the growth of the local currency denominated loan
portfolio, which generated 9.4ppts and 8.9ppts higher yields than
the foreign currency loan portfolio in 4Q20 and in 2020,
respectively. In addition, cost of funds increased by 20bps y-o-y
in 4Q20 and by 50bps y-o-y in 2020, primarily on the back of
increase of cost of local currency denominated cost of client
deposits and notes , and high levels of liquidity
-- Retail Banking net loan book reached GEL 8,734.7mln at 31
December 2020, up 17.6% y-o-y and up 3.8% q-o-q. On a constant
currency basis, retail loan book increased by 11.0% y-o-y and by
3.9% q-o-q in 4Q20. Local currency denominated loan book increased
by 15.0% y-o-y and by 5.7% q-o-q, while the foreign currency
denominated loan book grew by 20.9% y-o-y and by 1.6% q-o-q. As a
result, the local currency denominated loan book accounted for
55.1% of the Retail Banking loan book at 31 December 2020 (56.3% at
31 December 2019 and 54.1% at 30 September 2020). The consumer loan
portfolio, which is potentially most sensitive to foreign currency
risk, is now largely de-dollarised, while the share of retail
mortgage loans in local currency was 45.7% at 31 December 2020
-- The y-o-y loan book growth primarily reflected continued
strong loan origination levels in the secured consumer and mortgage
segments. The q-o-q increase in the loan originations levels in all
segments reflects the recovery of customer activity levels since
June 2020:
RETAIL BANKING LOAN BOOK BY PRODUCTS
GEL million, unless
otherwise Change Change Change
noted 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
Loan originations
Consumer loans 518,313 440,644 17.6% 448,172 15.7% 1,473,388 1,604,892 -8.2%
Mortgage loans 647,580 411,058 57.5% 459,596 40.9% 1,429,682 1,438,383 -0.6%
Micro loans 391,914 421,009 -6.9% 301,439 30.0% 1,045,992 1,313,371 -20.4%
SME loans 362,858 365,923 -0.8% 353,294 2.7% 1,118,559 1,093,744 2.3%
Outstanding balance
Consumer loans 1,763,017 1,592,454 10.7% 1,737,043 1.5% 1,763,017 1,592,454 10.7%
Mortgage loans 3,733,658 3,042,506 22.7% 3,550,606 5.2% 3,733,658 3,042,506 22.7%
Micro loans 1,701,501 1,491,951 14.0% 1,687,567 0.8% 1,701,501 1,491,951 14.0%
SME loans 1,424,330 1,031,475 38.1% 1,308,007 8.9% 1,424,330 1,031,475 38.1%
-- Retail Banking client deposits increased to GEL 7,101.7mln at
31 December 2020, up 24.3% y-o-y and up 6.0% q-o-q. The
dollarisation level of deposits stood at 68.7% at 31 December 2020,
compared to 68.0% at 31 December 2019 and 69.1% at 30 September
2020. The cost of foreign currency denominated deposits stood at
1.5% in 4Q20 (up 10bps y-o-y and flat q-o-q) and 1.4% in 2020 (down
10bps y-o-y), while the cost of local currency denominated deposits
increased by 90bps y-o-y and went down by 30bps q-o-q in 4Q20, and
increased by 100bps y-o-y in 2020. The spread between the cost of
RB's client deposits in GEL and foreign currency was 4.5ppts during
4Q20 (GEL: 6.0%; FC: 1.5%), compared to 3.7ppts in 4Q19 (GEL: 5.1%;
FC: 1.4%) and 4.8ppts in 3Q20 (GEL: 6.3%; FC: 1.5%). On the full
year basis, spread widened to 4.7ppts in 2020 (GEL: 6.1%; FC:
1.4%), compared to 3.6ppts in 2019 (GEL: 5.1%; FC: 1.5%)
-- Retail Banking net fee and commission income . Net fee and
commission income generation increased by 5.8% y-o-y and was
largely flat q-o-q in the fourth quarter of 2020, reflecting the
recovery in customer activity during the second half of 2020. On a
full year basis, the y-o-y decrease in net fee and commission
income was primarily driven by slower customer activity due to
COVID-19 pandemic and temporary removal of fees on transactions
executed through our mobile and internet banking platforms from
mid-March 2020, for a two-month period, in order to decrease
customer visits to branches and incentivise the transfer of
customer activity to digital channels. Furthermore, the lack of
external tourism, as well as no Georgian's travelling abroad,
resulted in a decline in net fees charged on currency conversion
operations
-- RB's asset quality. Cost of credit risk ratio was 0.6% in
4Q20 (up from 0.2% in 4Q19 and down from 0.8% in 3Q20) and 2.1% in
2020 (up from 1.2% 2019). The increase in cost of credit risk ratio
in 2020 was due to the IFRS 9 reserve builds, created for the full
economic cycle in 1Q20, primarily related to deterioration of the
macro-economic environment and expected creditworthiness of
borrowers as a result of the COVID-19 impact. These assumptions
were further revisited to reflect the better visibility and the
macro-economic forecast scenarios published by the NBG in May, and
an in-depth review of a significant proportion of borrowers in the
second half of 2020, resulting in additional ECL reserves in the
following quarters
-- Our Retail Banking business continued to further execute on
our strategy towards continuous digitalisation, as demonstrated by
the following performance indicators:
Volume information Change Change Change
in GEL thousands 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
Retail Banking
customers
Number of new
customers 46,815 55,303 -15.3% 56,074 -16.5% 156,343 178,857 -12.6%
Number of customers 2,616,480 2,540,466 3.0% 2,587,177 1.1% 2,616,480 2,540,466 3.0%
Cards
Number of cards issued 255,333 230,540 10.8% 213,686 19.5% 714,272 766,653 -6.8%
Number of cards
outstanding 2,137,744 2,145,060 -0.3% 2,184,591 -2.1% 2,137,744 2,145,060 -0.3%
Express Pay terminals
Number of Express Pay
terminals 3,020 3,217 -6.1% 3,130 -3.5% 3,020 3,217 -6.1%
Number of transactions
via Express Pay
terminals 21,002,305 27,434,540 -23.4% 22,508,942 -6.7% 80,295,072 108,329,849 -25.9%
Volume of transactions
via Express Pay
terminals 2,601,145 2,334,579 11.4% 2,380,932 9.2% 8,559,210 8,244,816 3.8%
POS terminals
Number of desks 21,331 15,592 36.8% 20,465 4.2% 21,331 15,592 36.8%
Number of contracted
merchants 11,763 7,519 56.4% 9,829 19.7% 11,763 7,519 56.4%
Number of POS
terminals 27,184 21,869 24.3% 25,706 5.7% 27,184 21,869 24.3%
Number of transactions
via POS terminals 27,378,339 24,073,703 13.7% 28,790,910 -4.9% 99,895,533 83,054,544 20.3%
Volume of transactions
via POS terminals 741,638 742,067 -0.1% 746,195 -0.6% 2,670,672 2,555,076 4.5%
Internet banking
Number of active users
(10) 142,832 294,081 -51.4% 140,592 1.6% 142,832 294,081 -51.4%
Number of transactions
via internet bank 1,057,994 1,268,672 -16.6% 1,080,287 -2.1% 4,218,690 5,302,066 -20.4%
Volume of transactions
via internet bank 678,385 641,560 5.7% 543,202 24.9% 2,459,137 2,269,103 8.4%
Mobile banking
Number of active users
(10) 717,599 513,677 39.7% 671,959 6.8% 717,599 513,677 39.7%
Number of transactions
via mobile bank 19,538,695 11,541,763 69.3% 17,197,028 13.6% 62,525,478 35,938,168 74.0%
Volume of transactions
via mobile bank 3,047,189 1,564,891 94.7% 2,463,558 23.7% 8,940,584 4,646,167 92.4%
(10) The users that log-in in internet and mobile bank at least
once in three months
-- Growth in client base to 2.6 million customers at 31 December
2020 was due to the increased offering of cost-effective remote
channels and substantially improving our positioning in many key
areas. Based on the independent research conducted in fall 2020,
Bank of Georgia is regarded as the most trusted financial
institution and top of mind in Georgia
-- The number of outstanding cards was largely flat y-o-y at 31
December 2020. The number of Loyalty programme Plus+ cards, reached
1,161,948 at 31 December 2020, up 35.3% y-o-y and up 9.6% q-o-q
-- Digital channels . We have actively continued the further
development of our digital strategy and more than 95% of the total
daily transactions of individuals were executed through digital
channels during 2020
- mBank and iBank digital offloading. The Bank continued to
develop digital products and upgrade digital channels'
functionalities to refine end-to-end digital journeys and
incentivise transferring customer activity to digital channels. In
2020, new innovative products and features were introduced,
including digital card, peer-to-peer payments, bill splitting and
money request, fully digital consumer lending process, embedded
online chat, and fully redesigned iBank, among others. As a result
of increased investments and efforts in this direction, the number
of active users, as well as the number and volume of transactions
through these channels, particularly, mBank, continued to expand
rapidly
- The utilisation of Express Pay terminals . The Bank has a
large network of self-service terminals throughout Georgia, which
are used extensively by its customers. Self-service terminals are
viewed as a key transition channel from physical to digital, and
the migration has been significant over the past few years. The
decline in number of transactions both y-o-y and q-o-q in 4Q20 and
y-o-y in 2020 was primarily due to the continuous migration of
customers activity to the mobile banking platform, as well as
slow-down in economic activity since March 2020
-- Business iBank. In 2019, the Bank released a new business
internet banking platform for MSME and corporate clients, with
features designed to make its use an intuitive and smooth
experience. Since then, we have focused our efforts on making the
Business iBank even more useful for business transactions to
further incentivise the transfer of client activity to digital
channels. In 4Q20, the number (up 1.7% y-o-y and up 11.4% q-o-q)
and volume (up 12.1% y-o-y and up 17.8% q-o-q) of Business iBank
transactions increased, primarily reflecting the acceleration in
business activities during the second half of 2020. On a full year
basis, the number and volume of transactions through Business iBank
grew by 3.9% and 7.8% y-o-y, respectively, and 96% of daily
transactions of legal entities were executed through the internet
bank in 2020
-- In December, 2020 The Banker named Bank of Georgia Bank of
the Year 2020 in Georgia. In August 2020, Global Finance Magazine
named Bank of Georgia Best Consumer Digital Bank in Georgia in
2020, including regional awards in sub-categories such as Best
Online Product Offering, Best Online Investment Management
Services, Best Digital Bank in Lending and Best Trade Finance
Services in Central and Eastern Europe for 2020
-- SOLO, our premium banking brand, was the least impacted
business from our Retail Banking segments, and continued its growth
and investment in its lifestyle brand. We have 11 SOLO lounges, of
which 9 are located in Tbilisi, the capital of Georgia, and 2 in
major regional cities of Georgia. The number of SOLO clients
reached 60,330 at 31 December 2020 (54,542 at 31 December 2019 and
58,351 at 30 September 2020). At 31 December 2020, the product to
client ratio for the SOLO segment was 4.8, compared to 2.0 for our
retail franchise. While SOLO clients currently represent 2.3% of
our total retail client base, they contributed 30.4% to our retail
loan book, 38.5% to our retail deposits, 21.5% and 27.8% to our net
retail interest income and to our net retail fee and commission
income in 4Q20, respectively. The fee and commission income from
the SOLO segment was GEL 7.8mln in 4Q20 (GEL 6.4mln in 4Q19 and GEL
7.9mln in 3Q20) and GEL 27.4mln in 2020 (GEL 25.5mln in 2019). SOLO
Club, a membership group within SOLO, which offers exclusive access
to SOLO products and offers ahead of other SOLO clients at a higher
fee, continued to increase its client base. At 31 December 2020,
SOLO Club had 5,565 members, up 1.5% y-o-y and up 0.2% q-o-q
-- MSME banking. The number of MSME segment clients reached
229,780 at 31 December 2020, up 4.2% y-o-y and up 0.6% q-o-q.
MSME's gross loan portfolio reached GEL 3,295.5mln (up 22.2% y-o-y
and up 3.3% q-o-q) and client deposits and notes amounted to GEL
958.3mln (up 18.6% y-o-y and up 9.3% q-o-q) at 31 December 2020.
The MSME segment generated operating income of GEL 57.7mln in 4Q20
(up 3.5% y-o-y and up 17.3% q-o-q) and GEL 198.5mln in 2020 (down
4.7% y-o-y), with the latter decline primarily driven by the
slow-down in business activity on the back of COVID-19 pandemic
-- Our digital ecosystem has played an important role in
supporting the Georgian economy through the COVID-19 pandemic, by
both enhancing digitisation of businesses and partnering with the
local startup ecosystem. It rests on four main business verticals:
real estate, e-commerce, logistics, and point of sale. In
2019-2020, we launched three platforms - real estate platform
area.ge, online marketplace extra.ge and inventory management and
point-of-sale solution for MSMEs Optimo. Key developments during
2020 are described below:
- In 1Q20, the Group in response to COVID-19 outbreak accepted
the social and commercial challenge to play a vital role in
addressing accelerated digital service demand. Due to social
distancing and restrictions imposed on commercial activities, the
Group's digital ecosystem arm proactively restructured its
operations and commercial offerings to adapt to the changing
environment. The core focus fell on extra.ge, which after its
acquisition in 2Q19 has been transformed into one of the largest
full-scale digital marketplaces in Georgia, and the full-scale
re-launch was completed in 1Q20. In 2Q20 and 3Q20, extra.ge mainly
focused on the acquisition of market share. 4Q20 was a very strong
quarter on the back of the tightened restrictions put in place at
the Government at the end of November, which stimulated online
sales. The number of extra.ge visitors increased by 50% q-o-q,
total registered users increased by 109%, and the number of
completed orders more than doubled. extra.ge also launched the
first ecommerce mobile app in Georgia in 4Q20. Through different
active campaigns and initiatives, the platform doubled the network
of merchants to 400+ vendors and 7,000+ private sellers, selling
110,000+ products and services, and significantly increased the
number of registered users, delivering a 62% increase in cashless
payments
- Following the COVID-19 outbreak, the Group structured a unique
digital solution for merchants who faced customer scarcity and a
heavy burden of restrictions. With the best-in-class solution,
Adapter, merchants can now undergo fast and efficient
transformation to digital sales with just a simple plug-in. Adapter
combines Optimo, an effective inventory and order management
platform, with extra.ge, a digital marketplace, through which
merchants can sell their products directly to remote customers.
Adapter quickly gained popularity amongst market players, small
merchants, and large physical marketplaces. Adapter was accepted by
hundreds of retailers and producers, exceeding initial targets
- The COVID-19 outbreak significantly decreased activity in the
real estate sector, which directly impacted area.ge's operations.
In 2Q20, area.ge refocused its strategy towards facilitating and
accelerating real estate sales, developing multiple solutions for
real estate development companies, which connect them closely with
brokers and other market players, such as banks and financial
institutions. In 3Q20, in response to the Government's new
subsidised mortgage loan programme, the Group launched a solution,
subsidireba.ge, one of the top visited websites on this
programme
- At the beginning of 2020, the Group reassessed its strategy,
and in order to be able to meet the wide range of customer needs,
we decided to partner with others. With this aim, in 2Q20, the
Group partnered with 500 Startups and Georgia's Innovation and
Technology Agency, and launched 500 Georgia Acceleration programme.
The programme focuses on accelerating the development of Georgian
and international early stage startups operating in the region. In
2020, 28 companies from ten different business verticals (fintech,
healthcare, lifestyle, accounting services, auto and
transportation, HR services, travel and hospitality, Adtech,
Agtech, Natural Language Processing (NLP) and communications)
completed the programme, and currently are candidates to join our
Digital Area ecosystem. Since the launch, the startups have raised
more than US$ 5.5 million from external international investors and
venture capital funds. In 2Q21, four of the 28 startups will
complete the final acceleration stage in San Francisco
- During 2018-2020, the Group has invested c.US$ 6.5 million in
the development of the Digital Area Ecosystem, of which investment
in 2020 amounted US$ 2.7 million . The Group plans an additional
investment in the range of US$ 3-10 million during 2021-2023
-- Retail Banking recorded a profit of GEL 76.0mln in 4Q20 (GEL
92.6mln in 4Q19 and GEL 81.1mln in 3Q20), and GEL 128.6mln in 2020
(compared to profit adjusted for one-off costs of GEL 328.7mln(11)
in 2019). RB ROAE was 22.0% in 4Q20 (31.4% in 4Q19 and 25.0% in
3Q20) and 10.0% in 2020 (28.6%(11) in 2019). The reduced
profitability in 2020 reflected the lower NIM and operating income,
and increased cost of risk and non-recurring costs relating to the
COVID-19 pandemic
(11) Profit and ROAE in 2019 exclude GEL 10.1mln one-off
employee costs (net of income tax) related to termination benefits
of the former CEO and executive management
CORPORATE AND INVESTMENT BANKING (CIB)
CIB provides (1) loans and other credit facilities to Georgia's
large corporate clients and other legal entities, excluding SME and
micro businesses; (2) services such as fund transfers and
settlements services, currency conversion operations, trade finance
services and documentary operations as well as handling savings and
term deposits; (3) finance lease facilities through the Bank's
leasing operations arm, the Georgian Leasing Company; (4) brokerage
services through Galt & Taggart; and (5) Wealth Management
private banking services to high-net-worth individuals and offers
investment management products in Georgia and internationally
through representative offices and subsidiaries in Tbilisi, London,
Budapest, Istanbul and Tel Aviv.
GEL thousands, unless
otherwise Change Change Change
noted 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
INCOME STATEMENT
HIGHLIGHTS(13)
Net interest income 66,736 65,642 1.7% 68,454 -2.5% 267,641 217,874 22.8%
Net fee and commission
income 10,933 11,928 -8.3% 9,500 15.1% 38,585 37,018 4.2%
Net foreign currency gain 11,017 14,341 -23.2% 4,976 121.4% 35,959 49,355 -27.1%
Net other income 10,184 9,212 10.6% 4,653 118.9% 24,342 13,506 80.2%
Operating income 98,870 101,123 -2.2% 87,583 12.9% 366,527 317,753 15.3%
Salaries and other employee
benefits (14,588) (15,495) -5.9% (13,034) 11.9% (52,352) (57,975) -9.7%
Administrative expenses (5,215) (8,989) -42.0% (4,483) 16.3% (17,652) (22,886) -22.9%
Depreciation, amortisation
and impairment (2,400) (2,387) 0.5% (2,352) 2.0% (9,659) (8,437) 14.5%
Other operating expenses (471) (295) 59.7% (235) 100.4% (1,231) (1,042) 18.1%
Operating expenses (22,674) (27,166) -16.5% (20,104) 12.8% (80,894) (90,340) -10.5%
Operating income before cost
of risk 76,196 73,957 3.0% 67,479 12.9% 285,633 227,413 25.6%
Cost of risk (22,264) (7,389) NMF 6,745 NMF (113,955) (14,548) NMF
Net operating income before
non-recurring items 53,932 66,568 -19.0% 74,224 -27.3% 171,678 212,865 -19.3%
Net non-recurring items - (217) NMF (1) NMF (1,375) (293) NMF
Profit before income tax
and one-off costs 53,932 66,351 -18.7% 74,223 -27.3% 170,303 212,572 -19.9%
Income tax expense (4,079) (5,344) -23.7% (7,619) -46.5% (14,097) (19,819) -28.9%
Profit adjusted for one-off
costs 49,853 61,007 -18.3% 66,604 -25.2% 156,206 192,753 -19.0%
One-off termination costs - - - - - - (4,094) NMF
of former CEO and executive
management (after tax)
Profit 49,853 61,007 -18.3% 66,604 -25.2% 156,206 188,659 -17.2%
BALANCE SHEET HIGHLIGHTS
Net loans and finance lease
receivables, currency
blended 4,662,273 3,804,448 22.5% 4,389,114 6.2% 4,662,273 3,804,448 22.5%
Net loans and finance
lease
receivables, GEL 947,036 720,375 31.5% 759,898 24.6% 947,036 720,375 31.5%
Net loans and finance
lease
receivables, FC 3,715,237 3,084,073 20.5% 3,629,216 2.4% 3,715,237 3,084,073 20.5%
Client deposits, currency
blended 6,394,734 3,824,667 67.2% 5,797,522 10.3% 6,394,734 3,824,667 67.2%
Client deposits, GEL 3,346,032 1,305,230 156.4% 2,724,735 22.8% 3,346,032 1,305,230 156.4%
Client deposits, FC 3,048,702 2,519,437 21.0% 3,072,787 -0.8% 3,048,702 2,519,437 21.0%
Time deposits, currency
blended 3,322,179 1,349,969 146.1% 2,814,979 18.0% 3,322,179 1,349,969 146.1%
Time deposits, GEL 2,299,346 366,847 526.8% 1,651,521 39.2% 2,299,346 366,847 526.8%
Time deposits, FC 1,022,833 983,122 4.0% 1,163,458 -12.1% 1,022,833 983,122 4.0%
Current accounts and demand
deposits, currency blended 3,072,555 2,474,698 24.2% 2,982,543 3.0% 3,072,555 2,474,698 24.2%
Current accounts and
demand
deposits, GEL 1,046,686 938,383 11.5% 1,073,214 -2.5% 1,046,686 938,383 11.5%
Current accounts and
demand
deposits, FC 2,025,869 1,536,315 31.9% 1,909,329 6.1% 2,025,869 1,536,315 31.9%
Letters of credit and
guarantees,
standalone (off-balance
sheet
item) 1,585,421 1,376,196 15.2% 1,520,262 4.3% 1,585,421 1,376,196 15.2%
Assets under management(12) 2,769,192 2,490,144 11.2% 2,739,991 1.1% 2,769,192 2,490,144 11.2%
RATIOS
ROAE (13) 20.7% 28.5% 30.7% 18.1% 25.6%
Net interest margin,
currency
blended 3.3% 3.8% 3.6% 4.7% 3.6%
Cost of credit risk ratio 0.4% 0.5% -1.1% 1.4% 0.2%
Cost of funds, currency
blended 3.6% 4.0% 3.4% 3.6% 4.1%
Loan yield, currency blended 8.5% 9.2% 8.6% 8.6% 9.1%
Loan yield, GEL 12.7% 12.5% 13.0% 12.8% 12.0%
Loan yield, FC 7.6% 8.5% 7.7% 7.7% 8.6%
Cost of deposits, currency
blended 4.7% 3.3% 4.6% 4.4% 3.3%
Cost of deposits, GEL 7.8% 6.1% 7.8% 7.7% 5.8%
Cost of deposits, FC 1.8% 1.7% 1.8% 1.7% 1.8%
Cost of time deposits,
currency
blended 6.9% 5.4% 6.7% 6.6% 5.4%
Cost of time deposits,
GEL 8.8% 7.6% 8.7% 8.9% 7.2%
Cost of time deposits, FC 3.7% 4.2% 3.8% 3.8% 4.3%
Current accounts and demand
deposits, currency blended 2.6% 2.1% 2.7% 2.5% 2.1%
Current accounts and
demand
deposits, GEL 6.2% 5.3% 6.4% 6.1% 4.9%
Current accounts and
demand
deposits, FC 0.7% 0.2% 0.6% 0.5% 0.3%
Cost / income ratio (14) 22.9% 26.9% 23.0% 22.1% 28.4%
Concentration of top ten
clients 9.7% 9.9% 9.5% 9.7% 9.9%
(12) We have amended the Assets under management definition in the third
quarter of 2020 to exclude certain illiquid assets that we hold in custody,
and include only the most liquid assets that are being traded on an ongoing
basis, and where we earn material fees on holding or trading such assets.
The previous period balances have been restated accordingly
(13) The income statement adjusted profit in 2019 excludes GEL 4.1mln
one-off employee costs (net-off income tax) related to the former CEO
and executive management termination benefits. The amount is comprised
of GEL 3.8mln (gross of income tax) excluded from salaries and other employee
benefits, GEL 1.1mln (gross of income tax) excluded from non-recurring
items, and GEL 0.8mln tax benefit excluded from income tax expense. The
2019 ROAE has been adjusted accordingly
(14) The cost/income ratio in 2019 is adjusted for GEL 3.8mln one-off
employee costs (gross of income tax) related to termination benefits of
the former executive management
Performance highlights
-- Corporate and Investment Banking delivered strong results.
CIB was least affected by the COVID-19 pandemic outbreak in terms
of operating activity in 2020 and generated solid net interest
income and net fee and commission income throughout the period,
coupled with efficient cost discipline. This resulted in y-o-y
increase in operating income before cost of risk, which was up 3.0%
y-o-y and up 12.9% q-o-q in 4Q20, and up 25.6% y-o-y in 2020
-- CIB's net interest income increased by 1.7% y-o-y and was
slightly down by 2.5% q-o-q during the fourth quarter of 2020, and
demonstrated outstanding growth of 22.8% y-o-y in 2020. CIB NIM was
3.3% in 4Q20 (down 50bps y-o-y and down 30bps q-o-q) and 4.7% in
2020 (up 110bps y-o-y) . In 4Q20, 50bps y-o-y decrease in NIM was
primarily driven by 70bps y-o-y decrease in currency blended loan
yields, partially offset by 40bps y-o-y decline in cost of funds,
while 30bps q-o-q decrease in NIM was the result of 20bps q-o-q
increase in cost of funds, coupled with 10bps q-o-q decline in
currency blended loan yields. On a full year basis, cost of funds
decreased by 50bps y-o-y, which was partially offset by 50bps y-o-y
decline in currency blended loan yields, resulting in 110bps y-o-y
increase in NIM in 2020
-- CIB's net fee and commission income was GEL 10.9mln in 4Q20,
down 8.3% y-o-y and up 15.1% q-o-q, reaching the full year of 2020
with GEL 38.6mln net fee and commission income, up 4.2% y-o-y. The
q-o-q and y-o-y growth in net fee and commission income in 4Q20 and
2020, respectively, was largely driven by increased fees generated
from guarantees and letters of credit issued and brokerage service
fees
-- CIB's loan book and dollarisation . CIB loan portfolio
reached GEL 4,662.3mln at 31 December 2020, up 22.5% y-o-y and up
6.2% q-o-q. On a constant currency basis, CIB loan book was up
10.4% y-o-y and up 6.5% q-o-q. The concentration of the top 10 CIB
clients was 9.7% at 31 December 2020 (9.9% at 31 December 2019 and
9.5% at 30 September 2020). Foreign currency denominated net loans
represented 79.7% of CIB's loan portfolio at 31 December 2020,
compared to 81.1% a year ago and 82.7% at 30 September 2020. At 31
December 2020, 39.1% of total gross CIB loans were issued in
foreign currency with exposure to foreign currency risk with regard
to income, while 40.9% of total gross CIB loans were issued in
foreign currency with no or minimal exposure to foreign currency
risk
-- Dollarisation of CIB deposits decreased to 47.7% at 31
December 2020 from 65.9% a year ago and from 53.0% at 30 September
2020. De-dollarisation of CIB's deposit portfolio was primarily
supported by a significant, 156.4% y-o-y increase in local currency
denominated deposits and only 21.0% y-o-y growth in foreign
currency denominated deposits in 2020. The interest rates on local
currency deposits increased significantly (up 170bps y-o-y and flat
q-o-q in 4Q20, and up 190bps y-o-y in 2020), while interest rates
on foreign currency deposits were largely flat (up 10bps y-o-y and
flat q-o-q in 4Q20, and down 10bps y-o-y in 2020), and the cost of
deposits in local currency remained well above the cost of foreign
currency deposits during 2020. The increase in interest rates on
local currency deposits during 2020 were mainly driven by the
pressure on local currency funding during the first half of the
year, however, this impact was subsequently stabilised to more
normal levels as a result of the new local currency funding
instruments introduced by the NBG to the market, as well as the
deposits of the Ministry of Finance of Georgia placed with banks
starting from the end of second quarter of 2020. These represent
lower yielding funds provided to the Banking system in order to
support the local currency liquidity on the market
-- Net other income. Significant y-o-y increase in net other
income during 2020 was mainly related to a gain on revaluation of
investment property recorded in 4Q20, largely driven by the local
currency devaluation in 2020, coupled with higher income from
operating leases. Furthermore, the Group recorded net losses from
derivative financial instruments (interest rate swap hedges) during
2019
-- Cost of risk. CIB's cost of credit risk ratio stood at 0.4%
in 4Q20 (compared to 0.5% in 4Q19 and a net gain of 1.1% in 3Q20)
and was 1.4% in 2020 (compared to 0.2% in 2019). The significant
increase in the cost of credit risk ratio in 2020 was driven by the
IFRS 9 ECL reserve builds, created for the full economic cycle in
1Q20, primarily related to deterioration of the macro-economic
environment and expected creditworthiness of borrowers as a result
of the COVID-19 pandemic impact. This reflected additional reserves
for borrowers operating across multiple sectors of the Georgian
economy, with the largest impacts in tourism, trade,
transportation, construction and real estate industries. These
assumptions were further revisited during the second quarter to
reflect the better visibility and the macro-economic forecast
scenarios published by the NBG in May 2020. Furthermore, in the
second half of 2020, the Group has completed an in-depth analysis
of financial standing and creditworthiness of all corporate
borrowers. Based on the analysis, the additional reserves booked in
the first quarter proved largely sufficient. In 4Q20, a further
in-depth analysis of corporate borrowers resulted in GEL 4.4mln
additional ECL provisions on loans to customers and finance lease
receivables, leading to a 0.4% cost of credit risk ratio.
As for the other expected credit loss and impairment charge on
other assets and provisions of GEL 17.9mln in 4Q20, this mainly
comprised additional reserves recorded by the Group in respect of
assets held for sale, guarantees issued and other financial assets,
and expenses accrued for certain legal fees
-- As a result, CIB recorded a profit of GEL 49.9mln in the
fourth quarter of 2020 (GEL 61.0mln in 4Q19 and GEL 66.6mln in
3Q20), and GEL 156.2mln in 2020 (compared to profit adjusted for
one-off costs of GEL 192.8mln(15) in 2019). CIB's ROAE was 20.7% in
4Q20 (28.5% in 4Q19 and 30.7% in 3Q20) and 18.1% in 2020 (25.6%(15)
in 2019)
(15) Profit and ROAE in 2019 are adjusted for GEL 4.1mln one-off
employee costs (net of income tax) related to termination benefits
of the former CEO and executive management
Performance highlights of Investment Management operations
-- Our strong Investment Management franchise comprises the
Bank's regional Wealth Management practice and the leading
investment bank in Georgia, Galt & Taggart. Our strategic
objective in Investment Management is to focus on profitable growth
through diversifying our Wealth Management offerings, unlocking the
retail brokerage potential, and fully digitalising brokerage
services
-- The Investment Management's AUM increased to GEL 2,769.2mln
as at 31 December 2020, up 11.2% y-o-y and up 1.1% q-o-q. This
includes a) deposits of Wealth Management franchise clients, b)
assets held at Bank of Georgia Custody, c) Galt & Taggart
brokerage client assets, and d) Global certificates of deposit held
by Wealth Management clients. The y-o-y increase in AUM mostly
reflected increase in client deposits of Wealth Management
franchise customers and client assets at Galt & Taggart, as
well as depreciation of the local currency during 2020
-- Strong international presence and diversified customer base
across multiple geographies. We served 1,578 wealth management
customers from 78 countries as at 31 December 2020 , compared to
1,557 customers as at 31 December 2019 and 1,554 customers as at 30
September 2020
-- Wealth Management deposits reached GEL 1,506.7mln as at 31
December 2020, up 7.3 % y-o-y and down 4.9% q-o-q, growing at a
compound annual growth rate (CAGR) of 8.0% over the last five-year
period . The cost of deposits stood at 2.9% in 4Q20 (down 30bps
y-o-y and q-o-q) and at 3.1% in 2020 (down 10bps y-o-y)
-- Galt & Taggart, which brings under one brand corporate
advisory, debt and equity capital markets research and brokerage
services, continues to develop local capital markets in Georgia. In
February 2020, Global Finance Magazine named Galt & Taggart
Best Investment Bank in Georgia for the sixth consecutive year
-- Our brokerage business demonstrated a remarkable growth in
2020. At 31 December 2020, the number of online brokerage customers
increased to 876, up 70.8% y-o-y. Gross revenue of brokerage
business reached GEL 6.5mln in 2020, up 75.4% y-o-y. This was
mostly driven by our online brokerage, offered in partnership with
Saxo Bank under a white label offering, which generated gross
revenue of GEL 5.0mln in 2020, up 165.6% y-o-y
- We see significant upsides in the brokerage business in
Georgia. Historically, we have focused on providing brokerage
services to our wealth management customers, whereas the retail
investor participation in the securities market has been limited.
Going forward, we aim to extend our offerings to the wider retail
and mass affluent segment
- In line with the Group's overall digital strategy, we are
working on digitalising our brokerage offerings. Over the past few
years we have made significant enhancements to our back- and
front-end processes to improve customer experience and engagement
in brokerage services. In 2020, we launched a single-view client
dashboard, a product combining investment banking products into a
single channel, which has improved overall customer experience and
reporting tools. In 2021, we also plan to launch the mobile
application to increase the usage and participation of the retail
segment in this business and to enhance customer experiences
-- In 2020, Galt & Taggart facilitated c.GEL 100mln local
private bond issuance of IFIs and the placement of c.GEL 70mln
local public and private bonds of several Georgian corporates. In
addition, Galt & Taggart acted as a rating advisor for two
microfinance organisations, assisting in obtaining credit rating
from Scope Ratings, and acted as an advisor for several Georgian
corporates during admission of their shares to trading on the
Georgian Stock Exchange
-- Galt and Taggart is a top-of-mind research house in Georgia
supporting our brokerage business and CIB activities with an
in-depth quality research coverage. In order to expand our
brokerage efforts, we recently introduced our Global Market Watch
coverage, which is our first step towards increasing retail
investor participation in this segment. In 2020, Galt & Taggart
published more than 70 research reports on Georgia's and regional
economies, key sector coverage in Georgia, regional fixed income
securities, and global macro trends. we had more than 6,500 unique
subscribers as at 31 December 2020
SELECTED FINANCIAL AND OPERATING INFORMATION
INCOME STATEMENT BANK OF GEORGIA GROUP CONSOLIDATED
GEL thousands, unless otherwise Change Change Change
noted 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
Interest income 420,398 393,480 6.8% 407,666 3.1% 1,595,427 1,437,161 11.0%
Interest expense (218,802) (186,389) 17.4% (203,636) 7.4% (817,785) (647,742) 26.3%
Net interest income 201,596 207,091 -2.7% 204,030 -1.2% 777,642 789,419 -1.5%
Fee and commission income 77,382 77,472 -0.1% 71,793 7.8% 274,458 284,193 -3.4%
Fee and commission expense (30,424) (30,914) -1.6% (26,261) 15.9% (108,955) (104,179) 4.6%
Net fee and commission income 46,958 46,558 0.9% 45,532 3.1% 165,503 180,014 -8.1%
Net foreign currency gain 26,457 37,177 -28.8% 19,179 37.9% 99,040 119,363 -17.0%
Net other income 25,016 18,439 35.7% 7,750 NMF 48,474 21,474 125.7%
Operating income 300,027 309,265 -3.0% 276,491 8.5% 1,090,659 1,110,270 -1.8%
Salaries and other employee
benefits (excluding one-offs) (64,243) (61,504) 4.5% (58,171) 10.4% (239,607) (231,443) 3.5%
One-off termination costs - - - - - - (12,412) NMF
of former executive management
(1)
Salaries and other employee
benefits (64,243) (61,504) 4.5% (58,171) 10.4% (239,607) (243,855) -1.7%
Administrative expenses (31,617) (35,131) -10.0% (24,443) 29.3% (105,531) (106,157) -0.6%
Depreciation, amortisation
and impairment (21,283) (23,815) -10.6% (19,125) 11.3% (82,937) (78,118) 6.2%
Other operating expenses (1,714) (1,095) 56.5% (873) 96.3% (4,560) (4,228) 7.9%
Operating expenses (118,857) (121,545) -2.2% (102,612) 15.8% (432,635) (432,358) 0.1%
Profit from associates 154 153 0.7% 214 -28.0% 782 789 -0.9%
Operating income before cost
of risk 181,324 187,873 -3.5% 174,093 4.2% 658,806 678,701 -2.9%
Expected credit loss on loans
to customers (14,579) (7,985) 82.6% (5,836) 149.8% (236,983) (94,155) 151.7%
Expected credit loss on finance
lease receivables (381) 451 NMF (2,371) -83.9% (8,025) (885) NMF
Other expected credit loss
and impairment charge on other
assets and provisions (23,471) (6,698) NMF (2,735) NMF (55,989) (12,544) NMF
Cost of risk (38,431) (14,232) NMF (10,942) NMF (300,997) (107,584) NMF
Net operating income before
non-recurring items 142,893 173,641 -17.7% 163,151 -12.4% 357,809 571,117 -37.3%
Net non-recurring items (excluding
one-offs) 21 (1,591) NMF 254 -91.7% (41,311) (10,723) NMF
One-off termination costs - - - - - - (3,985) NMF
of former CEO (2)
Net non-recurring items 21 (1,591) NMF 254 -91.7% (41,311) (14,708) NMF
Profit before income tax expense 142,914 172,050 -16.9% 163,405 -12.5% 316,498 556,409 -43.1%
Income tax expense (excluding
one-offs) (11,065) (15,515) -28.7% (15,051) -26.5% (21,555) (58,619) -63.2%
Income tax benefit related - - - - - - 2,161 NMF
to one-off termination costs
of former CEO and executive
management (3)
Income tax expense (11,065) (15,515) -28.7% (15,051) -26.5% (21,555) (56,458) -61.8%
Profit 131,849 156,535 -15.8% 148,354 -11.1% 294,943 499,951 -41.0%
One-off items (1)+(2)+(3) - - - - - - (14,236) NMF
Profit attributable to:
- shareholders of the Group 131,220 155,823 -15.8% 147,704 -11.2% 293,584 497,664 -41.0%
- non-controlling interests 629 712 -11.7% 650 -3.2% 1,359 2,287 -40.6%
Earnings per share (basic) 2.76 3.30 -16.4% 3.11 -11.3% 6.17 10.45 -41.0%
Earnings per share (diluted) 2.76 3.29 -16.1% 3.11 -11.3% 6.17 10.42 -40.8%
BALANCE SHEET BANK OF GEORGIA GROUP CONSOLIDATED
GEL thousands, unless otherwise Dec-20 Dec-19 Change Sep-20 Change
noted y-o-y q-o-q
Cash and cash equivalents 1,970,955 2,153,624 -8.5% 2,154,224 -8.5%
Amounts due from credit institutions 2,016,005 1,619,072 24.5% 1,980,195 1.8%
Investment securities 2,544,397 1,786,804 42.4% 2,205,244 15.4%
Loans to customers and finance
lease receivables 14,192,078 11,931,262 18.9% 13,627,144 4.1%
Accounts receivable and other loans 2,420 3,489 -30.6% 4,935 -51.0%
Prepayments 27,593 42,632 -35.3% 32,021 -13.8%
Inventories 10,340 12,297 -15.9% 11,406 -9.3%
Right-of-use assets 83,208 96,095 -13.4% 85,859 -3.1%
Investment property 231,241 225,073 2.7% 221,517 4.4%
Property and equipment 387,851 379,788 2.1% 390,401 -0.7%
Goodwill 33,351 33,351 0.0% 33,351 0.0%
Intangible assets 125,806 106,290 18.4% 117,941 6.7%
Income tax assets 22,033 282 NMF 40,484 -45.6%
Other assets 325,994 143,154 127.7% 216,159 50.8%
Assets held for sale 62,648 36,284 72.7% 46,072 36.0%
Total assets 22,035,920 18,569,497 18.7% 21,166,953 4.1%
Client deposits and notes 14,020,209 10,076,735 39.1% 12,985,039 8.0%
Amounts owed to credit institutions 3,335,966 3,934,123 -15.2% 3,757,646 -11.2%
Debt securities issued 1,585,545 2,120,064 -25.2% 1,628,188 -2.6%
Lease liabilities 95,635 94,616 1.1% 98,522 -2.9%
Accruals and deferred income 53,894 52,471 2.7% 43,474 24.0%
Income tax liabilities 62,434 37,918 64.7% 70,854 -11.9%
Other liabilities 332,322 102,662 NMF 212,093 56.7%
Total liabilities 19,486,005 16,418,589 18.7% 18,795,816 3.7%
Share capital 1,618 1,618 0.0% 1,618 0.0%
Additional paid-in capital 526,634 492,072 7.0% 513,407 2.6%
Treasury shares (54) (64) -15.6% (54) 0.0%
Other reserves 71,227 (7,481) NMF 38,201 86.5%
Retained earnings 1,939,122 1,655,256 17.1% 1,807,432 7.3%
Total equity attributable to shareholders
of the Group 2,538,547 2,141,401 18.5% 2,360,604 7.5%
Non-controlling interests 11,368 9,507 19.6% 10,533 7.9%
Total equity 2,549,915 2,150,908 18.6% 2,371,137 7.5%
Total liabilities and equity 22,035,920 18,569,497 18.7% 21,166,953 4.1%
Book value per share 53.41 45.36 17.7% 49.67 7.5%
BELARUSKY NARODNY BANK (BNB)
Change Change Change
INCOME STATEMENT HIGHLIGHTS 4Q20 4Q19 y-o-y 3Q20 q-o-q 2020 2019 y-o-y
GEL thousands, unless
otherwise stated
Net interest income 8,888 7,194 23.5% 8,735 1.8% 36,249 27,586 31.4%
Net fee and commission
income 1,268 1,602 -20.8% 1,220 3.9% 5,678 7,169 -20.8%
Net foreign currency
gain / (loss) 1,963 6,548 -70.0% (42) NMF 6,202 20,688 -70.0%
Net other income / (expense) 1,240 92 NMF (110) NMF 1,812 463 NMF
Operating income 13,359 15,436 -13.5% 9,803 36.3% 49,941 55,906 -10.7%
Operating expenses (8,334) (9,493) -12.2% (7,812) 6.7% (32,950) (35,366) -6.8%
Operating income before
cost of risk 5,025 5,943 -15.4% 1,991 152.4% 16,991 20,540 -17.3%
Cost of risk 2,819 (7) NMF (1,449) NMF (3,981) (2,691) 47.9%
Net non-recurring items (128) (46) NMF 36 NMF (125) (110) 13.6%
Profit before income
tax 7,716 5,890 31.0% 578 NMF 12,885 17,739 -27.4%
Income tax (expense)
/ benefit (1,768) (1,261) 40.2% 76 NMF (2,734) (3,404) -19.7%
Profit 5,948 4,629 28.5% 654 NMF 10,151 14,335 -29.2%
BALANCE SHEET HIGHLIGHTS Dec-20 Dec-19 Change Sep-20 Change
y-o-y q-o-q
GEL thousands, unless
otherwise stated
Cash and cash equivalents 163,193 212,777 -23.3% 155,782 4.8%
Amounts due from credit
institutions 20,042 12,742 57.3% 14,614 37.1%
Investment securities 94,459 81,573 15.8% 74,936 26.1%
Loans to customers and
finance lease receivables 698,542 580,876 20.3% 702,231 -0.5%
Other assets 42,416 55,102 -23.0% 47,394 -10.5%
Total assets 1,018,652 943,070 8.0% 994,957 2.4%
Client deposits and notes 589,152 608,777 -3.2% 596,360 -1.2%
Amounts owed to credit
institutions 234,641 144,621 62.2% 209,535 12.0%
Debt securities issued 34,067 69,438 -50.9% 49,214 -30.8%
Other liabilities 28,237 11,038 155.8% 22,188 27.3%
Total liabilities 886,097 833,874 6.3% 877,297 1.0%
Total equity 132,555 109,196 21.4% 117,660 12.7%
Total liabilities and
equity 1,018,652 943,070 8.0% 994,957 2.4%
KEY RATIOS 4Q20 4Q19 3Q20 2020 2019
Profitability
ROAA, annualised(16) 2.4% 3.4% 3.0% 1.5% 3.1%
ROAA, annualised (unadjusted) 2.4% 3.4% 3.0% 1.5% 3.1%
ROAE, annualised(16) 21.3% 29.9% 26.0% 13.0% 26.1%
RB ROAE (16) 22.0% 31.4% 25.0% 10.0% 28.6%
CIB ROAE (16) 20.7% 28.5% 30.7% 18.1% 25.6%
ROAE, annualised (unadjusted) 21.3% 29.9% 26.0% 13.0% 25.4%
Net interest margin, annualised 4.4% 5.4% 4.8% 4.6% 5.6%
RB NIM 4.5% 5.7% 4.8% 4.5% 6.1%
CIB NIM 3.3% 3.8% 3.6% 4.7% 3.6%
Loan yield, annualised 10.4% 11.4% 10.7% 10.5% 11.7%
RB Loan yield 11.2% 12.4% 11.7% 11.4% 12.9%
CIB Loan yield 8.5% 9.2% 8.6% 8.6% 9.1%
Liquid assets yield, annualised 3.0% 3.7% 3.3% 3.4% 3.5%
Cost of funds, annualised 4.6% 4.7% 4.7% 4.7% 4.6%
Cost of client deposits and
notes, annualised 3.8% 3.0% 3.8% 3.6% 3.0%
RB Cost of client deposits
and notes 2.9% 2.5% 3.1% 2.9% 2.6%
CIB Cost of client deposits
and notes 4.7% 3.3% 4.6% 4.4% 3.3%
Cost of amounts owed to credit
institutions, annualised 6.6% 7.4% 6.9% 7.1% 7.1%
Cost of debt securities issued 7.0% 7.9% 7.0% 7.4% 7.7%
Operating leverage, y-o-y(17) -0.8% -7.3% 1.9% -4.8% -3.2%
Operating leverage, q-o-q(17) -7.3% -4.1% 17.8% 0.0% 0.0%
Efficiency
Cost / Income(17) 39.6% 39.3% 37.1% 39.7% 37.8%
RB Cost / Income (17) 46.8% 43.5% 41.8% 47.3% 38.8%
CIB Cost /Income (17) 22.9% 26.9% 23.0% 22.1% 28.4%
Cost / Income (unadjusted) 39.6% 39.3% 37.1% 39.7% 38.9%
Liquidity (18)
NBG liquidity coverage ratio
(minimum requirement 100%) 138.6% 136.7% 147.0% 138.6% 136.7%
Liquid assets to total liabilities 33.5% 33.9% 33.7% 33.5% 33.9%
Net loans to client deposits
and notes 101.2% 118.4% 104.9% 101.2% 118.4%
Net loans to client deposits
and notes + DFIs 89.4% 103.2% 92.1% 89.4% 103.2%
Leverage (times) 7.6 7.6 7.9 7.6 7.6
Asset quality:
NPLs (in GEL) 545,837 252,695 530,631 545,837 252,695
NPLs to gross loans to clients 3.7% 2.1% 3.8% 3.7% 2.1%
NPL coverage ratio 76.3% 80.9% 76.8% 76.3% 80.9%
NPL coverage ratio, adjusted
for discounted value of collateral 128.8% 139.6% 131.4% 128.8% 139.6%
Cost of credit risk, annualised 0.4% 0.2% 0.2% 1.8% 0.9%
RB Cost of credit risk 0.6% 0.2% 0.8% 2.1% 1.2%
CIB Cost of credit risk 0.4% 0.5% -1.1% 1.4% 0.2%
Capital adequacy:
NBG (Basel III) CET1 capital
adequacy ratio 10.4% 11.5% 9.9% 10.4% 11.5%
Minimum regulatory requirement 7.4% 10.1% 6.9% 7.4% 10.1%
NBG (Basel III) Tier I capital
adequacy ratio 12.4% 13.6% 12.0% 12.4% 13.6%
Minimum regulatory requirement 9.2% 12.2% 8.7% 9.2% 12.2%
NBG (Basel III) Total capital
adequacy ratio 17.6% 18.1% 17.3% 17.6% 18.1%
Minimum regulatory requirement 13.8% 17.1% 13.3% 13.8% 17.1%
Selected operating data:
Total assets per FTE 2,993 2,515 2,976 2,993 2,515
Number of active branches,
of which: 211 272 211 211 272
- Express branches (including
Metro) 105 162 105 105 162
- Bank of Georgia branches 95 98 95 95 98
- SOLO lounges 11 12 11 11 12
Number of ATMs 960 933 947 960 933
Number of cards outstanding,
of which: 2,137,744 2,145,060 2,184,591 2,137,744 2,145,060
- Debit cards 1,873,433 1,749,524 1,879,970 1,873,433 1,749,524
- Credit cards 264,311 395,536 304,621 264,311 395,536
Number of POS terminals 27,184 21,870 25,706 27,184 21,870
Number of Express pay terminals 3,020 3,217 3,130 3,020 3,217
FX Rates:
GEL/US$ exchange rate (period-end) 3.2766 2.8677 3.2878 3.2766 2.8677
GEL/GBP exchange rate (period-end) 4.4529 3.7593 4.2255 4.4529 3.7593
Dec-20 Dec-19 Sep-20
Full time employees (FTE),
of which: 7,363 7,383 7,112
- Full time employees, BOG
standalone 5,821 5,879 5,598
- Full time employees, BNB 537 565 538
- Full time employees, other 1,005 939 976
Shares outstanding Dec-20 Dec-19 Sep -20
Ordinary shares 47,530,584 47,210,876 47,528,417
Treasury shares 1,638,844 1,958,552 1,641,011
Total shares outstanding 49,169,428 49,169,428 49,169,428
(16) The 2019 ratios are adjusted for one-off employee costs
related to termination benefits of the former CEO and executive
management
(17) The 2019 ratios are adjusted for one-off employee costs
related to termination benefits of former executive management
(18) We stopped reporting the NBG liquidity ratio since 1
January 2020 due to the phase-out of the requirement of this ratio
per NBG's regulations
GLOSSARY
-- Alternative performance measures (APMs) In this announcement
the management uses various APMs, which they believe provide
additional useful information for understanding the financial
performance of the Group. These APMs are not defined by
International Financial Reporting Standards, and also may not be
directly comparable with other companies who use similar measures.
We believe that these APMs provide the best representation of our
financial performance as these measures are used by management to
evaluate the Group's operating performance and make day-to-day
operating decisions
-- Cost of funds Interest expense of the period divided by
monthly average interest bearing liabilities
-- Cost of credit risk Expected loss on loans to customers and
finance lease receivables for the period divided by monthly average
gross loans to customers and finance lease receivables over the
same period
-- Cost to income ratio Operating expenses divided by operating
income
-- Interest bearing liabilities Amounts owed to credit
institutions, client deposits and notes, and debt securities
issued
-- Interest earning assets (excluding cash) Amounts due from
credit institutions, investment securities (but excluding corporate
shares) and net loans to customers and finance lease
receivables
-- Leverage (times) Total liabilities divided by total
equity
-- Liquid assets Cash and cash equivalents, amounts due from
credit institutions and investment securities
-- Liquidity coverage ratio (LCR) High quality liquid assets (as
defined by NBG) divided by net cash outflows over the next 30 days
(as defined by NBG)
-- Loan yield Interest income from loans to customers and
finance lease receivables divided by monthly average gross loans to
customers and finance lease receivables
-- NBG (Basel III) Common Equity Tier I (CET1) capital adequacy
ratio Common Equity Tier I capital divided by total risk weighted
assets, both calculated in accordance with the requirements of the
National Bank of Georgia instructions
-- NBG (Basel III) Tier I capital adequacy ratio Tier I capital
divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions
-- NBG (Basel III) Total capital adequacy ratio Total regulatory
capital divided by total risk weighted assets, both calculated in
accordance with the requirements of the National Bank of Georgia
instructions
-- Net interest margin (NIM) Net interest income of the period
divided by monthly average interest earning assets excluding cash
for the same period
-- Net stable funding ratio (NSFR) available amount of stable
funding (as defined by NBG) divided by the required amount of
stable funding (as defined by NBG)
-- Non-performing loans (NPLs) The principal and interest on
loans overdue for more than 90 days and any additional potential
losses estimated by management
-- NPL coverage ratio Allowance for expected credit loss of
loans and finance lease receivables divided by NPLs
-- NPL coverage ratio adjusted for discounted value of
collateral Allowance for expected credit loss of loans and finance
lease receivables divided by NPLs (discounted value of collateral
is added back to allowance for expected credit loss)
-- Operating leverage Percentage change in operating income less
percentage change in operating expenses
-- Return on average total assets (ROAA) Profit for the period
divided by monthly average total assets for the same period
-- Return on average total equity (ROAE) Profit for the period
attributable to shareholders of the Group divided by monthly
average equity attributable to shareholders of the Group for the
same period
-- NMF Not meaningful
COMPANY INFORMATION
Bank of Georgia Group PLC
Registered Address
84 Brook Street
London W1K 5EH
United Kingdom
www.bankofgeorgiagroup.com
Registered under number 10917019 in England and Wales
Secretary
Link Company Matters Limited
65 Gresham Street
London EC2V 7NQ
United Kingdom
Stock Listing
London Stock Exchange PLC's Main Market for listed
securities
Ticker: "BGEO.LN"
Contact Information
Bank of Georgia Group PLC Investor Relations
Telephone: +44(0) 203 178 4052; +995 322 444444 (9282)
E-mail: ir@ bog.ge
Auditors
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London E14 5EY
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
United Kingdom
Please note that Investor Centre is a free, secure online
service run by our Registrar, Computershare,
giving you convenient access to information on your
shareholdings.
Investor Centre Web Address - www.investorcentre.co.uk .
Investor Centre Shareholder Helpline - +44 (0)370 873 5866
Share price information
Shareholders can access both the latest and historical prices
via the website
www.bankofgeorgiagroup.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR DKQBNCBKDBBB
(END) Dow Jones Newswires
February 25, 2021 02:00 ET (07:00 GMT)
Bank Of Georgia (LSE:BGEO)
Historical Stock Chart
From Feb 2024 to Mar 2024
Bank Of Georgia (LSE:BGEO)
Historical Stock Chart
From Mar 2023 to Mar 2024